Facebook Industry and External Environment Project Paper
Terry Kao Z1860334
Professor Geoffrey Gordon
September 24, 2018
TOC o “1-3” h z u Digital Advertising Industry PAGEREF _Toc525416875 h 3Highly Competitive in Digital Advertising Industry PAGEREF _Toc525416876 h 4Critical Success Factors PAGEREF _Toc525416877 h 5Big Data PAGEREF _Toc525416878 h 5Reach PAGEREF _Toc525416879 h 5Ability to quickly adopt new technology PAGEREF _Toc525416880 h 6Ability to produce unique and creative ideas PAGEREF _Toc525416881 h 6Having a good reputation PAGEREF _Toc525416882 h 6Economic trends PAGEREF _Toc525416883 h 7Global Ad Spending Stable Growth PAGEREF _Toc525416884 h 7Worldwide Digital Ad Spending PAGEREF _Toc525416885 h 8Digital Advertising Will Increasingly Be Mobile Advertising PAGEREF _Toc525416886 h 9Major Trends PAGEREF _Toc525416887 h 10Political Trend PAGEREF _Toc525416888 h 10Legal Trend PAGEREF _Toc525416889 h 10Other Trends/Factors PAGEREF _Toc525416890 h 11Advertising and Major Sport Events PAGEREF _Toc525416891 h 11References PAGEREF _Toc525416892 h 13
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Digital Advertising IndustryFacebook Advertising revenue is generated by displaying ad products on Facebook, Instagram, Messenger, and third-party affiliated websites or mobile applications. Facebook 10K showed that Facebook’s 98% of revenue came from advertising and mobile advertising revenue represented approximately 88% of total advertising revenue. Facebook involves (Fortune, 2017) most in the digital advertising industry. Digital advertising industry provides space across websites, mobile apps and social platforms like Facebook where audiences are targeted with the help of specific information about their purchasing habits and interests (Forbes, 2018). The channels of digital advertising include websites, search engine, online display, social media, mobile, and email (Act-On Software, 2015).
eMarketer predicts that North America has the top advertising market in 2018 at $232.48 billion and a 37.0% share of worldwide total media. Asia-Pacific will place second in regional media spend with $210.43 billion and one-third of global ad business. By 2020, digital advertising’s share of total advertising will near 50%. According to Medium, mobile advertising will represent 70% of digital adverting spend in 2019. eMarketer’s report indicate that search ad and display ad represent 92% of digital adverting revenues.
Compare to the traditional advertising media, digital advertising has no regional restrictions and has more valuable details about the individual. Brands are no longer limited to just demographics and firmographics but can target the exact audience most likely to purchase based on thousands of lifestyle, personality, behaviors, and purchase intent segmentation variables (V12 Data, 2018). Facebook has more than 5 million active advertisers, with 75% from outside the United States (Venture Beat, 2017).
Highly Competitive in Digital Advertising Industry045720000291528549530000According to Mason Digital, Google and Facebook are the digital advertising duopoly. A report (Quartz, 2018) said that the Facebook CEO Mark Zuckerberg didn’t feel Facebook is dominating the market. In fact, a report (eMarketer, 2016) shows that Google and Facebook share 45.7% in the total of $194.6B Digital Advertising market. However, digital advertising market is characterized by innovation, rapid change, and disruptive technologies. The other competitor might raise up to capture the market share. For example, Amazon knows what people actually buy, not just what they’re searching for (Digiday, 2018). On the other hand, Facebook and Google are banned in China, where Alibaba, Baidu and Tencent keep capture the growing digital advertising market (Gentlemen Marketing Agency, 2017).
Critical Success FactorsBig DataBig data is a powerful tool in digital advertising industry. Facebook has collected at least two billion monthly users of information. Facebook’s own advertising platform allows the advertisers to maximize their campaign effectiveness, by utilizing big data analytics indirectly (SmartData Collective, 2017).
ReachDigital advertising can reach a far greater number of people than traditional advertising because it’s not limited to a physical location. Digital Advertising can appear on mobile devices, giving a brand access to people everywhere.
Ability to quickly adopt new technologyAccording to IBISWorld Industry Report, Digital agencies must stay up-to-date with the latest developments in technology, from the newest advertising platform to the latest software used to track and analyze campaigns. For example, Facebook makes significant investments in technology both to improve its existing products, such as Facebook Dynamic ads, and to develop new products, such as mobile platform ads.
Ability to produce unique and creative ideasAccording to IBISWorld Industry Report, providing clients with unique ideas of how to promote their product can help agencies secure and retain clients. To illustrate, Facebooks knows that creating video can be more difficult for small businesses that have fewer resources, so Facebook has launched new tools to help anyone make videos that work well on mobile. Facebook also testing Video Creation Kit, which gives advertisers easy-to-use video templates for different marketing objectives.
Having a good reputationAccording to IBISWorld Industry Report, Digital advertisers that develop a solid brand with a good reputation achieve a greater level of success within the industry. Any corporation of a size of Facebook is expected by stakeholders in general, general public and non-governmental organization in particular to behave in a socially responsible manner and to illustrate commitment in dealing with a wide range of environmental issues.
Economic TrendsGlobal Ad Spending Stable Growth126682576200
According to (eMarketer, 2016) report, Worldwide ad spending will reach $724.06 billion by the end of 2020, with annual gains hovering between 5% and 9%. North America is the largest advertising market and will continue to growth in a healthy rate for next few years. Asia-Pacific will be the second-largest region for ad spending and has been one of the fastest growing ad markets for years.
Worldwide Digital Ad Spending118110019050
According to (eMarketer, 2016) report, Digital ad spending will increase by 20.3% to reach $194.60 billion in 2016, making up 35.3% of total media ad spending. By 2020, spending will top $335 billion and represent over 46% of total media ad investment. Bernstein analyst Carlos Kirjner wrote that in the most optimistic scenario—Facebook could grow revenues to $20 billion by 2017 (ARK Invest, 2017). In reality, Facebook’s ad business reached $40 billion in 2017.
Digital Advertising Will Increasingly Be Mobile Advertising
According to (eMarketer, 2016) report, in 2016, mobile ads will for the first-time account for more than half of digital ad investment and almost 20% of total ad spending. By 2020, mobile’s share will climb to 73.7% of digital and 34.2% of total media ad investment.
Major TrendsPolitical TrendIn some countries, the government controlled the media by monitoring systems and firewalls, shuttering publications or websites, and jailing dissident journalists, bloggers, and activists (Council on Foreign Relations, 2017). The social networking site is often used by millions of people as a platform to voice disagreement with government policies and corrupt practices all over the world. This has caused the restriction of the social networking site in a number of developing countries with human rights issues, where governments are afraid that people can use Facebook to spread information and unite for their cause.
Furthermore, politicians use digital advertising as a tool for targeting the audiences. Politicians can send the separate messages to target group members and respond with the group members (Creative Direct Marketing Group, 2018). For example,
Legal TrendThe Federal Trade Commission (FTC) enforces federal laws related to protecting consumer privacy and security and pursues violations of Section 5 of the FTC Act barring unfair and deceptive practices affecting commerce (MarTech Advisor, 2018). When digital advertising industry self-monitoring fails, the FTC will take action. Advertisers may also have to worry about in 2017 after the Federal Communications Commission passed new privacy rules that require Internet Service Providers to obtain opt-in consent before sensitive data, including browsing and app usage history, can be collected and used for ad targeting purposes (Chief Marketer, 2017). Facebook was under investigation by FTC after the cambridge analytica scandal, a political marketing firm that improperly obtained personal information from approximately 87 million Facebook user profiles (Time, 2018).
Other Trends/FactorsAdvertising and Major Sport EventsThe first half of 2018, overall growth in media revenues worldwide has been driven by major global sporting events, such as the Winter Olympics in South Korea and the FIFA World Cup in Russia, which fueled increased spending on television advertising associated with these events, as well as other traditional and digital advertising and marketing channels, including public relations, content marketing and mobile advertising (Chief Marketer, 2018). However, the traditional advertising media is challenged by the digital advertising media in the sports advertising market. For example, the cost for a single 30 second spot ad in Super Bowl is $5.2 million. With a budget of $5.2 million on Facebook, the ads would reach 2 million more people than the 111.3 million watched the Super Bowl in 2017 (Digiday, 2018).
Social Media Grows as Newspapers Decline
In the U.S., weekday print circulation has shrunk from a high of nearly 60 million in 1994 to 35 million in 2018. Advertising revenue has cratered, falling from $65 billion in 2000 to less than $19 billion in 2016 (The Washington Post, 2018). On the other hand, nearly 64% of U.S. adults use social media sites, and half of those users get news there — amounting to 30% of the general population (Pew Research Center, 2014).
References”Why Google and Facebook Prove the Digital Ad Market Is a Duopoly,” Fortune, July 28, 2017
“Seven Things You Should Know About Digital Advertising This Year,” Forbes. January 11, 2018
Worldwide Ad Spending eMarketer 2016
“eMarketer Releases New Global Media Ad Spending Estimates,” eMarketer, May 7, 2018
“Global trends in the advertising industry Part I: Follow the money,” Medium, December 19, 2017
“Digital Marketing: The 7 Essential Channels,” Act-On Software, August 24, 2015
“Facebook has more than 5 million advertisers, with 75% from outside the U.S.,” Venture Beat, April 10, 2017
“Trends Spurring the Growth of Digital Advertising,” V12 Data, June 9, 2018
“Google and Facebook – The Digital Advertising Duopoly,” Mason Digital, July 17, 2018
“Is Facebook a monopoly? Mark Zuckerberg doesn’t have an answer,” Quartz, April 10, 2018
“The duopoly still dominates, but it’s facing its limits,” Digiday, May 11, 2018
“Online Advertising Trends in China,” Gentlemen Marketing Agency, September 21, 2017
Facebook 10K 2018
“Media Censorship in China,” Council on Foreign Relations, February 17, 2017
“22 Surprising Marketing Trends for Political Campaigns,” Creative Direct Marketing Group, April 4, 2018″Digital Advertising and Consumer Privacy: Three Trends to Watch,” MarTech Advisor, March 9, 2018
“Top Legal Issues Facing Marketers in 2017,” Chief Marketer, January 23, 2017
“Mark Zuckerberg Survived Congress. Now Facebook Has to Survive the FTC,” Time, April 12, 2018
“Digital Advertising Agencies in the U.S.,” IBISWorld Industry Report, March 2018
“How Big Data is Affecting Social Media Metrics and Facebook Ad Strategies,” SmartData Collective, May 11, 2017
“How Internet Advertising Can Grow to $600 Billion by 2023,” ARK Invest, July 18, 2018
“Global Advertising & Marketing Revenues Set To Grow 5.5% To $1.3 Trillion,” Chief Marketer, August 23, 2018
“Sports and the Value of Digital Sponsorship: More Than an Add-on,” TrackMaven, June 5, 2017
“What a $5.2 million Super Bowl ad can buy in digital media,” Digiday, January 29, 2018
“A Once Unimaginable Scenario: No More Newspapers,” The Washington Post, March 21, 2018
“How social media is reshaping news,” Pew Research Center, September 24, 2014