The online advertising sector has proved resilient - and it’s only going to get stronger

Facebook has used advertising to turn its fortunes around - the question, now, is how the industry can keep pace and keep growing.

This month saw Twitter hit the headlines for its hugely impressive debut on the New York Stock Exchange. After its first day of trading, shares in the site closed at $44.30, up more than 73 per cent from their initial price of $23. Last May, there was a huge frenzy around Facebook’s gargantuan floatation. Share prices initially dropped and many naysayers proclaimed that Facebook had overshot its mark, entering at $38 a share. However, from July to September 2013, its share price doubled and is currently trading around the $50 mark.

It’s not just brands going public. Acquisitions for huge sums of money are taking place regularly. Instagram had only 12 employees when it was acquired for a cool billion dollars last year. Just last week, the founder of Snapchat turned down a $3 billion offer from Facebook. Such moves have led to plenty of not-so-hushed murmurs of a tech bubble forming, especially around digital brands.

But how are brands able to command such large valuations, or, in Snapchat’s case, turn such substantial offers down. Put simply, it’s down to a transformation of business models and the potential it offers for monetisation. Snapchat, for example, is hugely popular among teenagers – a bracket it is notoriously difficult to reach. This means, if it can get its platform strategy right, it is going to be in a very strong position to command significant revenue for advertising and marketing on its platform.

Facebook has used advertising effectively to turn its fortunes around. Its most recent results revealed it had broken through the $2billion revenue barrier and exceeded forecasts from Thomsons Reuters. A major contributor to these better-than-expected results was mobile advertising. It stated that 49 percent of its ad revenue – or $882 million – came from mobile devices, up from 14 percent a year earlier. Analysts have also stated that there has been a real rush to advertise with Facebook thanks to the new ad format it rolled out earlier this year. The ability to integrate in-stream ads into the user experience has worked, thanks to it being new, cheap and able to bring better response rates.

Shortly before Twitter declared its intentions to go public clear, it made a shrewd investment, shelling out $350m for MoPub, a mobile advertising exchange. This will enable Twitter to expand its influence as well as serve different formats, such as native advertising – which aims to deliver less intrusive ads to its user base.

In short, advertising is at the heart of online’s success and, increasingly, we will start to see more interesting and useful content delivered to users. The sector is booming and the question that is being levelled at the industry is “how is it going to maintain this pace and keep growing?”.

Firstly, Facebook and Twitter are undoubtedly doing well, thanks to their advertising strategies. But it should be pointed out that, despite being vast, they are closed networks. Brands certainly need to harness the opportunity social networks present, but in order to capture optimal audience engagement, they need to ensure they are not restricting themselves solely to these walled gardens. The term “social” should not be restricted to these behemoths. The whole web is based on social communication (the emergence of sharing buttons, the resilience of email etc.) and herein lies the real opportunity.

A swathe of data is being produced and shared across the entire web every second. It’s for this reason that I believe we are actually on the verge of an incredibly significant landmark in advertising’s history – and one that we can draw parallels with the financial industry.

In 1986, the financial industry experienced its “Big Bang”, where everything changed. Almost overnight, the bowler hats and handshakes for completing a deal disappeared and were replaced with electronic, screen-based trading. It completely shook up the industry and saw London’s position as a financial capital considerably enhanced.

We are, without doubt, approaching a similar moment in the advertising industry, albeit less abrupt.

The volume of the conversation online continues to get louder, but realising this is only the first step, the elixir is not only to be present, but also prepared to intelligently and safely use the huge amount of data available from this digital behaviour. Humans don’t have the speed to extract the key nuggets of information from it all, in a timely way. As such, it’s all about understanding and reaching audiences “programmatically”.

Customers have evolved - meaning marketers must evolve with them. They expect a different approach, and have adopted a form of “banner blindness”: an ability to blank out and ignore ads for products that are either not relevant or have already been purchased, rendering the advertising useless. Marketers must move in real time with their target audience, and understand the value of big data in order to identify where potential consumers are on their journey; business intelligence is of critical importance.

This is why a programmatic approach is going to be the key to the evolution of both advertising and content online. Unlocking these insights will give organisations a “Single Customer View” and valuable understanding of consumer behaviour, allowing them to engage with customers, helping create more targeted marketing campaigns, which results in increased return on investment and business growth. The Big Bang for advertising is undoubtedly coming and it’s the brands that adapt to this change that will reap the benefits.

Rupert Staines is European Managing Director at RadiumOne

Twitter CEO Dick Costolo is interviewed after Twitter's IPO on 7 November, 2013. Photograph: Andrew Burton/Getty Images.

Rupert Staines is European Managing Director at RadiumOne

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Want an independent-minded MP? Vote for a career politician

The brutally ambitious are not content to fall in with the crowd. 

“Never having had a ‘real’ job outside of politics”: this is what the majority of respondents told a YouGov poll in 2014 when asked the most undesirable characteristic of the British politician. The result is hardly surprising. Type the words “career politician” into your search engine or raise the topic at a dinner party, and quickly you will be presented with a familiar list of grievances.

One of the fundamental criticisms is that career politicians in parliament are elitists concerned only with furthering their own interests. Their pronounced and self-serving ambition for climbing the ministerial ladder is said to turn them into submissive party-machines, sycophants or yes men and women, leading them to vote loyally with their party in every parliamentary division. But do we actually have evidence for this?

A new in-depth analysis, to be published later this month in the academic journal, Legislative Studies Quarterly, presents a forceful challenge to this conventional wisdom. In fact, I find that career politician MPs in the UK are more likely to rebel against their party than their non-career politician peers. Why?

My study was motivated by the observation that the existing impression of the party loyalty of career politicians is based mostly on anecdotal evidence and speculation. Moreover, a look through the relevant journalistic work, as well as the sparse extant academic literature, reveals that the two main hypotheses on the topic make starkly contradictory claims. By far the most popular — but largely unverified — view is that their exclusively professional reliance on politics renders career politicians more brutally ambitious for frontbench office, which in turn makes them especially subservient to the party leadership.

The opposing, but lesser known expectation is that while career politicians may be particularly eager to reach the frontbenches, “many of them are also much too proud and wilful to be content to serve as mere lobby fodder”, as the late Anthony King, one of the shrewdest analysts of British politics, observed nearly thirty years ago on the basis of more qualitative evidence.

Faced with these opposing but equally plausible prognoses, I assembled biographical data for all the MPs of the three big parties between 2005-15 (more than 850) and analysed all parliamentary votes during this period. I followed the debate’s prevalent view that an exclusive focus on politics (e.g. as a special adviser or an MP’s assistant) or a closely-related field (e.g. full-time trade union official or interest group worker) marks an MP as a careerist. In line with previous estimations, just under 20 per cent of MPs were identified as career politicians. The extensive statistical analysis accounted for additional factors that may influence party loyalty, and largely ruled out systematic differences in ideology between career and non-career politicians, as well as party or term-specific differences as drivers of the effects.

As noted above, I find strong evidence that career politician backbenchers are more likely to rebel. The strength of this effect is considerable. For example, amongst government backbenchers who have never held a ministerial post, a non-career politician is estimated to rebel in only about 20 votes per parliament. By contrast, a career politician dissents more than twice as often — a substantial difference considering the high party unity in Westminster.

This finding reveals a striking paradox between the predominantly negative opinion of career politicians on the one hand, and the electorate's growing demand for more independent-minded MPs on the other. In fact career politicians are the ones who perform best in delivering on this demand. Similarly, the results imply that the oft-cited career-related dependency of career politicians on the party can be overridden (or, at the very least, complemented) by their self-image as active and independent-minded participants in the legislative process. This should attenuate the prevalent concern that a rise in career politicians leads to a weakening of parliament’s role as a scrutinizing body.

Finally, the findings challenge the pervasive argument that a lack of experience in the real world disqualifies an MP from contributing meaningfully to the legislative process. Instead, it appears that a pre-parliamentary focus on politics can, under certain circumstances, boost an MP's normatively desirable willingness to challenge the party and the executive.

Raphael Heuwieser is researching political party loyalty at the University of Oxford.