The Need for Mobile Advertising Revenue is Causing Chaos for the Ad-Tech Stack

It’s easy to say ad-tech is in trouble, the terrible performance of ad-tech stocks during the past year is a story onto itself:

But the challenge is really about the plateau in desktop ad-revenue and the need to grow mobile ad-revenue. It doesn’t matter if it takes great banners or terrible banners, mobile revenue is the future of all revenue since it’s the most important place we consume content.

Chaos

So as our mobile consumption habits pivot to be even more mobile, a combination of three things will put enormous pressure on ad-tech that will cause a great deal of chaos:

  1. iOS9 enabling ad-blocking for the mobile web
  2. Apple’s phenomenal News app
  3. Facebook’s lighting fast Instant Stories

All three of these things have emerged because today’s experience for consuming mobile content is simply horrible.

Have you ever registered for a social network to consume click-bait news headlines and then be kicked into some horrible mobile web experience?

Apple wants to solve this problem with the News app.

Have you clicked on your friend’s shared article to see ad-tags load, close pointless pre-roll videos with their tiny X buttons and waiting, waiting, waiting for the content to load?

Facebook wants to solve this problem with Instant Stories.

Do you have $3.99 to never see another advertisement again?

The developer gold rush to create ad-blockers is making this easier than ever.


Make no mistake, the media press is often mentioning Google AMP, Facebook Instant Stories and using ad-blockers as a story about speed. While this is fundamentally correct, the implication isn’t a war of Google vs Facebook vs Apple, it’s a war for creating a better user experience than the status quo with the bloated ad-tech stack.

You can’t squeeze blood from a stone.

Ad-tech executives often misunderstand publishers; publishers only care about generating revenue that helps them produce content that users care about. But with the accelerating decline in print revenue and the massive influx of venture capital into ad-tech, publishers have chosen to try a larger than necessary assortment of ad-tech partners to grow revenue at the expense of a better user experience (bandwidth, speed and redundant tracking). The NYT had a phenomenal article on this topic and Hyperstop has some videos that make things even easier to understand.

The Verge takes 40 seconds to load:

https://www.youtube.com/watch?v=i9lJ3K8bC4U

Time has more than 30(!) different ad-tags

https://www.youtube.com/watch?v=8vij2FHE5i8

Let’s compare with Facebook:

https://www.youtube.com/watch?v=mI83gb8XnlE

So that was a video from Facebook, let’s see how it compares in the real world.

Facebook Instant Articles test

https://www.youtube.com/watch?v=KmsoCkedntQ

This real-life test works exactly as the demo.

Apple News test

https://www.youtube.com/watch?v=YVT_HHc4Rgw

Comparison of Fox News on Apple News vs Mobile Web

https://www.youtube.com/watch?v=bwskm255sqY

Watch the entire playlist of Mobile Site Speed & Ad-Tech Stack Test videos here.

Juggling and managing a variety of ad-tech partners, with their contracts, revenue targets, lofty promises and questionable technologies is extremely time and resource intensive. Having talented people to evaluate ad-tech partners is expensive and does not guarantee a positive yield despite potentially years of effort.

Experience+Audience Scale > Ad-tech

For Apple and Facebook, they’re both essentially side-stepping the entire ad-tech industry because they can deliver a massive audience to publishers that is a more streamlined monetization of a publisher’s content. And at their core, they both exponentially improve the user experience.

Even though Apple is singularly focused on the user experience, Apple recognizes the publisher’s needs for monetization and we see this in their 70/30 to 100/0% split with iAd. But for Facebook, despite being the massively prolific ad-tech player obviously dependent on advertising revenue, Instant Articles is about improving the user experience and increasing monetization for publishers. While some publishers will resist Facebook, the draw for ad-revenue provided by Facebook’s advertising ecosystem to Instant Articles will be a huge contrast to the publisher’s capabilities in monetizing its ad-tech stack.

The Publisher’s Gamble

If publishers are currently relying on Facebook’s traffic to monetize their stack of a dozen ad-tech partners, why not let Facebook focus on monetization so publishers can focus on improving their content? Publishers have failed to monetize the ecosystem of app downloads, wouldn’t they love to let the market leader in deriving advertising revenue route that revenue their way?

This is what leads me to believe that the squeeze is on in ad-tech because for the user, the Apple News, Facebook Instant Articles and ad-blocking experience is a fantastic user experience. For publishers, this is a potentially superior monetization strategy because the access to a scalable audience comes at little cost.

There is no question ad-tech will live on and parts of it will thrive but because the way we consume content is evolving dramatically there will be a massive correction within ad-tech that either supports our future consumption habits of content or be legacy formats.

Ultimately if the past seven years has been about deriving revenue on the mobile web and app for publishers, the next few years will be about revenue from Apple News, Facebook, the mobile web and apps. It will be like cord-cutting, an sizable and growing audience that has no loyalty to network or linear programming that eats away at the establishment and consumes content solely on their own terms.

Other observations:

  • I don’t believe Google AMP will be as dramatic as what Facebook and Apple are trying to do, it seems the engineers are running Google instead of the media sellers. I will address this next week.
  • I don’t think ad-blocking will be significant for publishers but it will be impactful for publishers and the ad-tech stack so it should cause a concern.
  • Best example of great content experience with huge audience scale trumping ad-tech: Snapchat.
  • Taboola and Outbrain are thriving because they’re paying twice the revenue to publishers than what programmatic revenue can deliver so why can’t Apple & Facebook do the same with mobile revenue to publishers?
  • Apple News for Apple TV isn’t a thing yet but think about it for a minute. This could easily be as big as Hulu (but probably smaller than YouTube).

If this interests you, I’d love to chat more about it:
johnny@hyperstop.co @johnnywon


Originally published at hyperstop.co.

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