The biggest global gathering of advertising industry professionals wrapped up this past weekend as the major players that drive the half trillion dollar global advertising market came together for the annual Cannes Lions Festival. There, I spoke on the future of OTT and digital advertising and what the biggest brands, agencies and technology companies are planning for the year ahead.
This was the year big tech leaned in heavily to shape the advertising conversation. Facebook, Google, Twitter, Snapchat, Pinterest, Microsoft, Pandora and Amazon all had a significant presence at Cannes last week. This investment reinforces that the future of advertising — and consumer engagement overall — is migrating rapidly to digital channels as digital advertising spend is now projected to reach $520 billion by 2023.
Within the continuing move to digital, there are some specific trends that were top of mind for agency and marketing execs alike. From the expanding and ever more complicated regulatory landscape – such as GDPR, the CCPA and other regulations being discussed and implemented around the world – to OTT and streaming’s effect on broadcast advertising, and the desire for marketers to break the Google and FB stranglehold on ad spend, this year’s Cannes ushered in a renewed sense of urgency and purpose from every aspect of the marketplace. Here’s a quick debrief on the three key threads the advertising industry dug into deeply at Cannes this year:
#1 – Privacy regulation
Following a number of high profile privacy bruises, the advertising and technology sector has shifted its stance on regulation. For many years the mantra was focused on self regulation. This narrative has taken a significant turn in the face of GDPR and other regulatory frameworks that seem to be flowing forth at an increasing rate. Now the call is for a clearer, more unified set of regulations that can be applied uniformly in a way that does not hurt competition or stifle access to the free internet. During a panel session I attended with S4 Chairman Martin Sorell, he noted the unintended consequences of the current regulatory work stating “GDPR reinforced the positional strength of the big guys.”
Martin rightly cautioned that we must be “extremely careful” as we move forward to craft new regulations that don’t embolden the likes of Facebook and Google at the expense of market competition and innovation. It’s now accepted in the industry that the unintended consequences of Europe’s landmark GDPR regulation served to strengthen the dominance of the big players. With California’s new law coming online soon and many other state laws being considered, there is an understandable concern in the business community and a desire for one clear, consistent regulatory framework to be implemented. This is especially critical in the US where we are already seeing the emergence of a potential 50 state patchwork of laws that will not only be unmanageable, but may knee cap the US tech industry.
#2 – OTT
Hulu, Netflix, Disney and other streaming platforms were out in force at Cannes, making the argument that the future of television is streaming. The assumption was clear among attendees that Netflix will begin accepting advertising dollars sooner than later. What is also interesting to note is that Netflix is likely looking into this because consumers want it — in fact, our research with The Harris Poll found that half of all OTT viewers prefer an ad-supported streaming model over a more expensive subscription-only service.
The other OTT trend to watch is that competition for Netflix revenue is about to get a lot steeper with a bevy of other services coming online, including budget-friendly offerings from Disney and Apple and a new service just launched this week by Viacom in partnership with BET and Tyler Perry. Most US consumers now stream, and they stream a lot, yet only 5% of US television advertising reaches the OTT market. Everyone recognized we are on the precipice of a major sea change in consumer engagement that will see massive shifts in budgets away from legacy linear platforms to where consumers are now spending large portions of their time.
#3 – The Google-Facebook duopoly
The number one concern of marketers, according to a recent eMarketer study, is the continued dominance of Facebook and Google. These concerns played out across Cannes. “Everybody wants to pull dollars away from Google and Facebook,” said David Spector, co-CEO and co-founder of ThirdLove. Michael Roth, CEO of IPG added “Everyone talks about government regulation breaking [Google and Facebook] up. But what really will happen is our clients will start not spending with them. And that will be the biggest effect eventually if it doesn’t get corrected.”
The sticking point for everyone is the dramatic asymmetry that exists today where, according to Comscore, consumers only spend about a third of their online time within the walled gardens of Facebook and Google yet nearly two-thirds of all digital spend flows into those channels. The net result is that marketers are significantly over-indexing spend on too few platforms and the content creators across the open web are losing their fair share of revenue. Meanwhile, Amazon is vying to be the third ad tech leader of the oligopoly with the completion of its ad tech stack through its purchase of Sizmek. There is a deep desire to address this dominance in 2020 and to unlock greater spend on the open web by taking the best parts of the walled gardens and making it more accessible.
Overall this felt like a much different Cannes from last year. This year was definitely a “glass is half full” Cannes, whereas in 2018, the mood was so somber we couldn’t even find the glass. Tech companies are worried about regulation but they see an alignment forming to address it. Marketers are worried about the continued dominance of Google and Facebook, yet they are beginning to see new players emerge with solutions that mirror the effectiveness of the walled gardens for the broader open web.
Consumers are rapidly migrating away from traditional television platforms but they are showing a huge appetite for streaming video and a desire for streaming advertising models, which advertisers can look forward to. Overall, Cannes demonstrated that advertising, creative and technology players have huge opportunity to recast engagement for a privacy complaint, always connected consumer landscape.
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