How do all these companies make money? Advertising.

Many of the businesses we will be visiting earn their revenue from advertising. Giants such as Facebook and Google have opened up a whole new realm of advertising possibilities in the world of digital marketing. I will focus on these two companies because their ubiquity and wealth of data make them highly popular for advertisers. Google ads work well to direct customers who already express interest in your offerings to your website specifically, while Facebook ads enable customers to discover offerings they would like but might not know they needed. I’ll also toss in a refresher on advertising on Spotify as another follow up to my presentation.

Facebook

Facebook is a mammoth of a platform for advertisers. Two billion people use Facebook every month, 500 million use Instagram every day, and 1 of every 5 minutes people in the US spend on mobile is on Facebook or Instagram. Facebook ads are affordable enough for small businesses, yet offer the scale and data-driven insights that larger companies crave.

Facebook has a wealth of additional resources to make the advertising experience even smoother. Free Blueprint courses guide advertisers through learning best practices. Local Boost Your Business events help businesses collaborate with other members of their communities and share tips for success.

How to run a Facebook ad

Picture1Choose a marketing objective, such as driving traffic to your website, conversions (purchases), lead generation, or increased brand awareness. Some results are easier to quantify than others. For example, you can measure the cost per lead generated and track purchases made within 2 weeks after exposure to the ad.

Picture2Narrow down an audience based on locations, age, gender, languages, and characteristics derived from their behavior on Facebook. This gets down to the nitty gritty, such as people interested in high-end interior design or current homeowners. 

Curious what Facebook knows about you? Click on the three dots next to any ad, click “Why am I seeing this?” and then click on “Manage Your Ad Preferences.” For this ad, I had visited Bustle’s website before, and I’ve expressed an interest in Amazon.com by clicking on an ad for Amazon before.

Picture3Set a daily or lifetime budget, and Facebook will automatically optimize how the budget is spent so you can get the most for your money.

Picture4Ads lend themselves well to a variety of creatives, such as single photos, videos, or carousels, slideshows, and collections of products. If you select multiple images or products, Facebook will optimize which to show first on the carousel based on how well each fares in initial tests.

Picture5While the ad runs, you can measure and track the cost per result and adjust appropriately.

Advantages:

  • Hyper Targeted, specific ads based on demonstrated characteristics of a large audience
  • Sophisticated tools will optimize the ad run and show detailed results
  • Intuitive platform and wealth of explanatory resources empowers small businesses

Disadvantages:

  • While the ads are often relevant to the user, they are still display ads, which are not very engaging
  • Facebook’s new algorithm will “prioritize posts that spark conversations and meaningful interactions between people…over public content.” This means that as the organic reach of business page posts goes down, even more companies will turn to advertising to spread their message. As a result, this might slightly increase ad costs.

Google

Picture6

There are plenty of options for advertising across Alphabet’s platform. Buying ads on search is considered a near-necessity in the advertising world. These ads are pay-per-click, so the advertiser is only charged if the user interacts with the ad.

The Google case assigned for class on Wednesday sums up the offerings well: “Advertising is Google’s largest revenue stream. Google matches advertising relevant to users based on their search queries, browsing history, and email contents. Google classifies advertising as either performance or brand advertising. Performance advertising includes relevant interactive ads that users can click on. These include the text-based ads placed within search results. Brand advertising seeks to increase users’ awareness of an advertiser’s products or services.”

Creating a search ad is remarkably easy, and handled via Google AdWords. All you have to do is to write the brief copy for the ad, choose the keywords that potential customers might search to find your business, and set a daily budget for your ads. AdWords has resources to help businesses optimize the copy of their advertisements with features such as longer headlines, links to important pages, and callouts for unique offers. Pricing is flexible, so businesses can start, stop, or change their ad whenever. Google offers in-depth analytics to measure the results of your ads during and after the campaign.

“Consumers spend 15+ hours per week researching on mobile sites and apps, and visit websites six times in the purchase process.” When customers are researching something that your business offers, being highly visible in the search results could result in a purchase. 

Ad experiences can be enriched by featuring directions to the advertiser’s brick and mortar store, showcasing local inventory, or making it easy for potential customers to call. 70% of mobile searchers report that they click to call directly from search results. Optimizing ads to include this kind of content can be powerful.

AdWords offers several tools to enable businesses. Manager Accounts is an intuitive dashboard for reporting, control, and billing of multiple accounts. Keyword Planner helps advertisers stay on top of relevant and cost-effective keywords. AdWords Editor manages large AdWords accounts with bulk editing tools. There is plenty of documentation online to guide advertisers. You can even become AdWords certified.

Advantages

  • Connects businesses to customer who are actively demonstrating interest in their offerings
  • Broad audience reach across Google Display Network and Youtube
  • Integrations in Google Search make it easier for the customer to reach the business
  • Network of resources to help businesses understand Google ads

Disadvantages

  • More difficult to reach customers who are unaware of your offerings
  • Often requires more tedious monitoring

 

Spotify

Hopefully, my presentation on Spotify convinced you of the powerful ways it can leverage the 100 billion data points it collects each day. Here is a more in-depth analysis of the ad options.

Advertisers can target users based on who they are, such as: age and gender, geography, language, interests and behaviors based on streaming habits and third-party data providers; or what they’re listening to, by targeting playlists or genres.

Spotify has rich internal analytics and third-party partnerships to provide advertisers with tangible results. It measures reach, resonance (brand awareness, purchase intent), and reaction (how the message drove business-building actions). Some big results:

  • 76% said the campaign was intended for people like them
  • 53% said the campaign increased interest in the brand
  • 61% said they were likely to buy the product

Ad options include: Roll over thumbnails to see the style of ad.

 

  • Branded moments: Users can unlock 30 minutes of ad-free listening by engaging in a brief experience with an advertiser. This ”gift” of ad-free music builds goodwill with customers.
  • Sponsored sessions: Similar to branded moments, these sessions offer 30 minutes of ad-free listening after a user watches a video message from the advertiser
  • Video takeovers: Immersive videos delivered to logged-in users
  • Sponsored Playlists: Align your brand with a playlist that matches your target audience.
  • Homepage Takeovers: Display ad at the top of the Browse page
  • Leaderboards: Standard display ad shown for 30 seconds
  • Overlays: Welcome users back to the app with an overlay ad
  • Audio everywhere: audio ads play between songs
  • Custom solutions: Build your brand’s profile by curating playlists for users to listen to

Advantages:

  • Unique ad formats drive brand affinity more than traditional display ads
  • Reach the most authentic, unfiltered characteristics of users

Disadvantages:

  • Picture16Likely lacks hyper-targeting capabilities of Facebook. By logging into Spotify with Facebook, you provide your public profile, friend list, birthday, hometown, email address. It doesn’t seem as though Spotify has access to your full advertising preferences profile. Thus, some characteristics may be off. For example, I listen to a lot of high-energy music, leading Spotify to believe I am a fitness enthusiast. Joke’s on them—I’ve been to the Plex twice this year. See your listening profile here.
  • Spotify Premium allows users to escape advertisements. I suspect Premium users listen more often and are more personally connected to music.

The ability to target new consumers has enabled these platforms to rise to success, while traditional marketing flounders. Any other marketing majors in this class? Would love to hear your thoughts!

10 thoughts on “How do all these companies make money? Advertising.

  1. Great post, Katie! This is very informative and extensive! I really appreciate the pros and cons analysis at the end of each product. Although it’s not new that ads make up a big portion of revenue for internet giants, it is interesting to see how each company is changing.

    I agree that Facebook is still deep in its struggle to eliminate fake news while trying to have a balance between user contents and monetized content. I wonder the same about Spotify and Youtube that premium users who pay to skip ads are more likely to be engaged users than who casually interacts with the platform and don’t mind the ads. Would be interested to hear the rationale behind offering ads free (but I love the student subscription!)

    Liked by 1 person

  2. Great post! It is interesting to see how far the evolution of advertisements has come. Around the age that we all were introduced to the internet, I remember having to install pop-up blockers to avoid the annoying, irrelevant ads. Now, I find myself voluntarily watching videos on Youtube for hours that were paid to have higher placement than others. With advertising reaching such new levels of personalization and targeting, the importance and demand for data analytics has never been higher. It is so cool to read about this kind of stuff for class, then see it being implemented in the real world on a daily basis.

    Liked by 1 person

  3. Great post, Katie! I’m always intrigued when I search a jacket online and it mysteriously shows up on Facebook ads while I’m scrolling through the app on my phone the next day. As tech platforms become increasingly competitive, the use of data for targeted ads seem vital to get your brand out there. While Google and Facebook have this method down, I’m curious to see how companies like Snapchat improve and develop their platform to further pull in revenue sources – data leads to dollars!

    Liked by 1 person

    • Ah, glad you brought up the jacket following you online! I should’ve mentioned retargeting more. It’s mainly due to tracking pixels: “Retargeting tags online users by including a pixel within the target webpage or email, which sets a cookie in the user’s browser. Once the cookie is set, you, the advertiser, are able to show display ads to that user elsewhere on the internet via an ad exchange. You can anonymously ‘follow’ your targeted prospect all over the Web.” It makes sense why companies focus on retargeting—the cost per click is often a quarter the cost of acquiring a new customer.

      Liked by 2 people

  4. Wow, this was great! I think it’s so interesting how big of a role public perception of targeted ads play. For companies such as Spotify, it seems uniformly accepted that they use our data to better customize our experiences. In contrast, there is usually backlash when ads are targeted to certain individuals on sites like Facebook. This may be due to the demographics that use these products, but I find it intriguing nonetheless.

    Liked by 1 person

  5. Excellent post, Katie! I learned something new about each company’s approach to advertising. I find Facebook’s highly personalized strategy particularly effective. The connections that Facebook’s algorithms establish between users’ interests and certain brands make for extremely impressionable ads. Facebook’s way of introducing users to brands that their friends are interested in is a smart and effective way to appeal to potential customers.

    A common thread between the three companies’ advertising platforms is how they democratize the advertising process. Small businesses and entrepreneurs no longer have to seek out advertising agencies to get the word out. A daily budget as little as $20 on Facebook might do the trick. It’s so interesting to see how the marketing industry is evolving!

    Liked by 1 person

  6. Awesome detail in this post! It’s amazing how targeted ads have become. I swear I think about something and next thing I know it’s on my Instagram or Facebook feed. Also, thanks to this post I now know how to run an FB ad and I can’t believe how easy (and affordable) it is!

    Liked by 1 person

  7. The first day I logged onto Facebook Ads Manager I was utterly lost. That said, great job synthesizing its capabilities and features in this blog post! I am eager to try out Google’s analytical tools soon to be able to compare the two. Furthermore, I like how you brought in Spotify to this discussion. Before I got Spotify Premium (Sad!), I could practically recite the words to every audio ad served to me. This is good for advertisers because their ads clearly resonated with me. Yet, they certainly didn’t create positive brand equity.

    Like

  8. Great post Katie! It’s so surprising to see how much of revenue these big companies earn is coming from advertising. From the discussion yesterday, Google is also an advertisement company that earns its 90% of their revenue, which I found pretty interesting because for the longest time Google is just one of those “clean” search engines with barely no advertisement. Thanks for the informative post!

    Like

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