The Fraud of Digital Advertising

Click Rates

Advertisers spend the most money on digital advertising ($111 billion per year).  Digital advertising spend is the fastest growing advertising segment.  Google and Facebook control 90% of digital advertising.  60% of digital advertising is fraud.  George Simpson in his article, Is Ad Fraud Inevitable? writes,. “Agencies and brands simply write off fraud as the cost of doing business online. That is, until someone comes along and says, you know, you’re wasting 60 cents of every dollar, or calculating that every ad dollar lost to fraud costs.”

So today’s research fact reveals after the fraud comes the CLICK.  Overall consumers click .09%. (See the above chart)

We can now create a digital advertising algorithm to help us understand what is going on:

  • Pay to reach 1,000 shoppers online
  • 60% fraud = reach 400 shoppers
  • .09% click
  • REACH – .36 shoppers after spending to reach 1,000
  • Pay $45 per click.  Not sale.  Not customer. But click.

Local Media:  Local media has tried to compete by switching to digital advertising.  This has proven to be a catastrophic mistake.  Local media trying to compete digital advertising is like the local high school basketball player trying to play against LeBron James, the NBA superstar.

Local media

 

How Amazon is destroying media companies

Amazon is destroying media companies.  The destruction goes from the biggest television companies, movie companies to the local newspaper in tiny communities.

How and why are they doing it?

The Amazon Battle Plan for destroying media companies:

1. Cut off their revenue streams

2. Use its 105 million list of Prime Members to offer advertisers better response rates

3.  Give advertisers access to the 55% of all online shopping searches that begin on Amazon.com

4. Sell products like Alexa, smart homes, and security system at incredibly Low Prices in order to take control over the future of shopping – i.e. voice-based search and AI driven “suggestions” for home and entertainment

Amazon can afford to invest in destroying media companies because it is the most successful company in the world, run by Jeff Bezos, the richest person in the world.  We all know Amazon as the online e-commerce site that controls over 50% of everything that is bought and sold online.  It may seem a bit like a “tinfoil hat” conspiracy to think about Amazon as the big bad media company.

Why would Amazon want to destroy media companies? 

Amazon’s Hidden Strategy:  Amazon wants to destroy media companies because it has a hidden strategy a to become the largest global media/commenications company.

Guess what?  It already is.  Amazon is the world’s biggest communication’s company:  “Amazon has movies, TV stations, cable streaming, music, and direct communication with over 105 US households and will soon bypass ALL of cable television.  Not one cable channel but ALL of them together. Staggering concept.   But wait!  They also own the Washington Post and they just bought MSG Cable Network.”

Amazon isn’t some big bad company that is taking over media through deception or fraud – Amazon is taking media and communications because its executive leadership is smarter than the executives running most media companies.  The major exception would be Disney, whose leadership is outstanding.

What makes Amazon’s executives so smart is they are focused on reality and facts.  When Bezos runs a meeting everyone is handed a 3-6 page type analysis of the problem to be discussed.

Everything STOPS.  Everyone in the meeting spends the next 30 minutes reading.  The meeting is then run with everyone, literally and figuratively, on the same page.  Most media companies aren’t run that way.

Fox Business News reports that Amazon has become so powerful it is “Stealing Market Share From Facebook and Google and is a threat to all traditional media companies.”  Fox News continues, It wasn’t that long ago that all the talk in the digital advertising market was centered on the duopoly of Facebook (NASDAQ: FB) and Google, a division of Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG).  In late 2017, Digital Content Next reported the pair would account for about 63% of online advertising in the U.S. last year, with Google nabbing 42% and Facebook garnering 21%. Even more telling, Brian Wieser of Pivotal Research Group estimated that the two companies accounted for 90% of the growth in the U.S. digital ads industry in 2017.”

So here is how those focused Amazon executives are destroying media companies – they RECOGNIZE and RESPOND in REAL-TIME to TRENDS & FACTS.

Before we detail out how Amazon is destroying media and communications companies it is important to look at its PRIMARY ADVANTAGE.  Amazon uses its e-commerce division to attract shoppers.

  • Amazon has over 105 million Prime Members105 million Prime Members, 55% of all product searches, and its growing grocery and fast food stores to offer shoppers AMAZING DEALS.  Amazon doesn’t care about losing money – they want to grow their LIST of shoppers.
  • Shoppers have changed.  Instead of looking at ads, 90% of shoppers begin the buying process by using their smart phones to search.  Guess what, 55% of all product searches begin on Amazon.
  • Data. Amazon has better data than Google, Facebook, and ALL other media and communications companies. Googgle and Facebook’s data is about views and clicks – Amazon’s data is about PURCHASE.  Advertisers want to know about who’s buying what.  Local and national media companies don’t have the data.
  • Voice-Based Search.  Amazon, with its 35 million Alexa voice assistants, already controls this communications channel.  Amazon is so far ahead of the voice trend in terms of advertising revenues that media companies don’t stand a chance.
  • Smart Home.  From speakers to thermostats Amazon is communicating with consumers.  Advertisers want targeted ads – Amazon is so targeted they know what music you listen to, how cool you keep your home, and when you are home.
  • Cloud computing.   Amazon is streaming EVERYTHING – music, movies, books, and podcasts. Ditto on Better Data.

THE CONSEQUENCES OF AMAZON DESTROYING MEDIA COMPANIES:

As more media companies go out of business because of Amazon – Amazon gains greater control of what news Americans receive.  With or without political bias, Amazon will homogenize the news.  American democracy is based on many different points of view.  If Amazon wins – there will be the Amazon point of view.