GAFA takes over the world
We have talked about GAFA for a long time – coining the term as it sort of channels Gaffer, the northern slang for Boss – and these companies certainly boss the digital world. The NYTimes have folded Microsoft in and termed them the Frightful Five, making the point they increasingly dominate our whole life – imagine living without them? Doing without Google or Amazon?
John Battelle has commented on these companies over the years too and here he compares the astonishing growth in their financial value. Between 2011 and 2014 the combined market cap almost doubled to $1813 billion. From 2014 to now it has grown by another trillion dollars to $2868 billion.
To add a little more context, at the time of the Amazon IPO in 1997 Jeff Bezos haggled with their Bankers to get them to increase the share price. Doing so raised another $7 million, valuing them at $428m versus around $450 billion now. That’s 1000% growth in 20 years.
With this value comes responsibility. The Economist makes the case that when Oil was the most valuable asset the big Oil firms were regulated. Now data has taken its place, regulation is needed.
This is further demonstrated by the EU fining Facebook £94m for misleading them on potential privacy issues related to their acquisition of WhatsApp. The Dutch and the French have also fined them over privacy issues.
The cadence of these measurement issues undermines the undoubted progress Facebook is making with brands as revenues grow. And provides succor for the siren voices encouraging a shift back to old media.
Most people we talk to are happy with the results from their Facebook investment, although many are keen to find ways to improve their performance and the complicated landscape can confuse some.
Google I/O – their annual developer event - is taking place this week and there is lots of news coming out. One thing that stood out is Lens – AI driven recognition of objects, reinforcing the importance of the camera as an input up there with the keyboard and voice. Older readers will remember Google Goggles as an early version of this and maybe also Word Lens, an acquisition they made which remerged as part of Google Translate. No word on whether Lens will solve Suduko games.
And still on the nostalgia tip, Google are refreshing the AdMob brand to help Android app developers better understand and monetise their apps. The Android payments service will be better integrated too.
Another anticipated move has happened too - the very impressive Google Assistant is now available as an iPhone app in the US – taking the fight to Siri. Fitting in with IoS has led to some compromises, but it should still work well if you use Google services like mail and calendar. On Android devices like the Nexus it’s a joy to use.
With the recent slightly disappointing sales figures for the iPhone, the next is eagerly awaited. Lots of stories about AR and one of the best Wall Street analysts has shared his predictions – suggesting a major focus on AR. Goldman Sachs think the new device could start at a new price point; $1000. Which would help drive the value of Apple to over $900b. If it’s a success, of course.
So why is Amazon worth 1000% more than when they IPO’d? This long read is a great look at their approach and the way their business model keeps evolving. A must read.
Their Alexa platform continues to evolve - shortly you will be able to add notifications to skills. Conscious that notifications can be annoying, the Alexa team are working with a few brands and getting consumer feedback before the making the service available to everyone. And this is some useful insight into ads and alexa
I was told this week that ITV ad revenue is likely to be down by around 9% over the first half of this year. With the Upfronts starting in the US everyone is wondering whether we have hit peak TV.
Our view is that traditional TV is still powerful but the ads have lost the war for attention. People watching have their smartphones by their side and use them. Search traffic shows this. Social media discussion of TV programmes shows this. The significant minority of people who fast forward through ad breaks show this too. The 3 hours that people spend on their smartphones every day is a function of this – people now stack their media.
This isn’t that different to what happened before mobile – the ad breaks are an opportunity to do something else and the smartphone is just another option. Remember the first remote control was called the ad zapper
A quote from Keith Weed of Unilever, in a good FT piece on how TV is changing, sums up the current state;
TV ads are still valuable – just not as valuable as they used to be. And now you can have newTV ads on Facebook etc it’s a good idea to test out new ways of telling your story. Blending all these opportunities has to be the best way forward and new models keep emerging. One very smart firm we have met recently analyses all the TV shows in real time and, when certain phrases are mentioned, it will bid up search terms (and social ads) in anticipation of a surge in traffic and so captures the value of that interest and intent that the TV show has triggered. All in a matter of seconds.
One person mentioned across these articles is Joe Marchese, who has just been appointed to run the ad sales for Fox. He came to Fox when they acquired his start up TrueX for $200m, which offered viewers the choice of seeing a tradition break of 6/8 ads or just one interactive ad. So he gets the new world and it will be interesting to watch how he rethinks the way they do ads. This podcast from him starts to get into this.
Finally An interesting new study from Enders (for Magazine trade body Magnetic) thinks that brands have lost sight of long term brand building in favour of short term promotional activity. And that, in the shift to digital, we may have lost some of the smart thinking needed to help brands grow.
Marrying the great thinking, that has defined the ad industry for the past 80 years, with the wonderful opportunities tech gives us, was the theme of a recent keynote we did for a Google event. Context is the perfect exemplar – it makes good sense to invest in context but our new plumbing doesn’t make that easy. We need to find a way to better engineer the plumbing so we capture the real value of building brands and businesses.
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