According to eMarketer, just two companies account for over 63% of online advertising revenue in the United States, and some analysts put their combined gross share at 77%. If you guessed Google and Facebook - bingo - well done! What’s even more amazing is that together, Google and Facebook accounted for 99% of the revenue growth from digital advertising in the US last year. In other words, that massive share is trending sharply higher.
It wasn’t that long ago that Google’s founders offered to sell PageRank to Yahoo for $1 million. Yahoo said no, and so did others. Yet any day now, Google will be a $1 trillion dollar company (perhaps the first).
Of course, Yahoo didn’t turn down an investment that was actually worth a million times the asking price. Even if they had bought it, their internal bureaucracy might have swiftly destroyed all its value and potential. Also, Google wasn’t Google yet. My contention is that perhaps a bigger leap forward than even their improved search algorithm was their easy, totally flexible, online ad-buying platform, “AdWords.” AdWords is the machine that prints Google’s well-earned money, and it’s all rooted in totally flexible “pay for performance.”
AdWords is great in many ways, for example, because it aligns the amount of money Google can make with the user search experience by actively rewarding relevancy. Pay-for-performance has many benefits for marketers of all kinds, but it’s been around before, too. The thing to focus on in all this success is the critical nature of the 100% flexibility. This was the critical factor in becoming the primary interface to ad buyers, and by owning the relationship and the data, Google and Facebook captured almost the entire ad buying marketplace.
Google didn’t follow the TV and radio networks and send armies of salespeople out to score “upfronts” or commitments. They just made it frictionless to buy - as much or as little as you want - and made sure it worked. Both Google and Facebook famously never spent huge amounts of money marketing themselves.
They know that marketers have budgets. They understand that companies with budgets are actively measuring performance: views, clicks, conversions, interactions, brand awareness, and so on. They don’t try to lock in any long-term spends or monthly minimums. Marketers want flexibility, their needs change, and they also want to adjust as they learn from their performance data over time. Google and Facebook’s approach of not getting upfront commitments, paradoxically resulted in spends much greater than if they had. In other words, less effort and cost actually resulted in far more reward and revenue.
Commitments carry risk, and all the time and effort spent getting ad dollars committed to a negotiated contract would only result in a “shaded down” amount anyway. If a marketer actually has $1 million to spend over the next 12 months - and they have to commit the spending to a full year - they’ll just shade down to be totally “safe.” Let’s say $75,000 is what they’re comfortable with, without knowing all the things that could require funds from them all year in other ways. Simply put, it’s risk aversion and uncertainty. And then there’s what’s known as an “anchoring” effect on the shaded-down value. Once that $75,000 gets locked in, that’s the anchor. If Google reaches back out to ask them to increase their budget to $150,000 due to strong performance, the buyer gets offended! ‘We agreed to $75K and now you want double?!’
By avoiding that messy back and forth altogether, marketers would start off with a little bit, then, looking at those strong results, increase and increase and increase over time, all on their own. Also, when that “set aside” for a trade show budget doesn’t materialize in June, the money gets pushed right into Google and Facebook campaigns! There’s no anchoring effect holding the marketers back, and even performance aside, they may devote all the new budgets to Google purely because it offers the easiest, most frictionless ad buy option. Not to mention they can launch a campaign instantly. Suddenly, Google and Facebook become the marketer’s de facto interface for buying online ads, and therefore, they naturally gets all of the new spending.
No marketing, very little sales effort, no committed spend or legal negotiations whatsoever, and by avoiding all of that overhead cost completely, the only penalty Google pays is that now they have 100x the amount of cash in their coffers to spend on free lunches for everyone and on “moonshot” self-driving car projects - as thanks for their total lack of effort relating to committed contracts.
Today’s marketer want a 100% flexible approach. Spend what you want, start or stop anytime, increase or decrease your efforts however and whenever you wish. Google’s race to become the first $1 trillion company is all the proof that’s required. Total flexibility is the only viable approach in online ad media of any type.
This model will surely grow to dominate recruitment advertising as well. Indeed is already there, and now Facebook and Google both have their eyes keenly on the “job ads” world.
Here at Symphony Talent, M-Cloud takes this totally flexible performance-based approach and applies it to our clients’ entire recruitment media budgets. So if you’re interested in total accountability and flexibility across your recruitment media investments, let’s have a chat. We’ll prove it to you, and if we don’t, you’re free to stop at anytime!