- Video remains the largest near-term opportunity across internet advertising, Facebook and YouTube command leading positions. With $160bn in global TV ad spend and $30bn of ad budgets up for review in 2015, the next 12 months could mark an inflection point in brand budget shift to digital video. The largest online video platforms, which each attract more than 1bn daily users, enjoy reach that far exceeds the largest television audiences. In our view, Facebook's launch of Total Ratings Point (TRP) Buying, which mirrors the mechanics of a traditional TV ad buy, is a clear attempt to capture greater share of TV budgets (see our note here). Comments regarding the ongoing success of brands' YouTube Preferred campaigns further underscored the value of premium online video and reinforce our view of Facebook and Google's dominant positions.
- All the buzz is about Instagram, though we expect very modest contribution in 3Q. While marketers throughout the week touted the success of initial Instagram campaigns, Instagram ads were limited to only a small number of beta partners through the third quarter. Our discussions with the head of digital marketing at a major ecommerce firm indicated that the holiday season should mark the first point of meaningful contribution from Instagram to Facebook's results. Our discussions further revealed that increased Instagram spend should come at the expense of standard display budgets over the near-term, as opposed to competing social platforms.
- New product launches from Google focus on first-party data and app install formats. Google announced a number of new ad products including Customer Match, which allows advertisers to link first-party CRM data with their bids in the Google paid search auction. First-party integration should provide incremental benefit to search CPCs. In addition, Google announced a number of features around app install ads. New features include promoted app ads in the Play Store as well as a Universal App platform, which enables advertisers to input a target cost-per-install and allows Google to optimize all other aspects of the campaign. In our view, greater penetration of the app install market could provide Google with more than $1bn in incremental revenue over the next two years.
- Ad blocking: less a threat than headlines suggest. Ad blocking was a topic of significant debate at the conference; despite alarmist headlines, our conversations with publishers and buyers were largely benign on the topic. Our takeaway is that while the spread of ad blocking software is marginally affecting mobile web display inventory, negative ramifications are limited to otherwise low-CPM units. Moreover, conference discussions highlighted dollars lost from ad blocking is likely to shift on a near dollar-for-dollar basis to formats like native, video, and newsfeed.
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