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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Is defeat in Stoke the beginning of the end for Paul Nuttall?

The Ukip leader was his party's unity candidate. But after his defeat in Stoke, the old divisions are beginning to show again

In a speech to Ukip’s spring conference in Bolton on February 17, the party’s once and probably future leader Nigel Farage laid down the gauntlet for his successor, Paul Nuttall. Stoke’s by-election was “fundamental” to the future of the party – and Nuttall had to win.
 
One week on, Nuttall has failed that test miserably and thrown the fundamental questions hanging over Ukip’s future into harsh relief. 

For all his bullish talk of supplanting Labour in its industrial heartlands, the Ukip leader only managed to increase the party’s vote share by 2.2 percentage points on 2015. This paltry increase came despite Stoke’s 70 per cent Brexit majority, and a media narrative that was, until the revelations around Nuttall and Hillsborough, talking the party’s chances up.
 
So what now for Nuttall? There is, for the time being, little chance of him resigning – and, in truth, few inside Ukip expected him to win. Nuttall was relying on two well-rehearsed lines as get-out-of-jail free cards very early on in the campaign. 

The first was that the seat was a lowly 72 on Ukip’s target list. The second was that he had been leader of party whose image had been tarnished by infighting both figurative and literal for all of 12 weeks – the real work of his project had yet to begin. 

The chances of that project ever succeeding were modest at the very best. After yesterday’s defeat, it looks even more unlikely. Nuttall had originally stated his intention to run in the likely by-election in Leigh, Greater Manchester, when Andy Burnham wins the Greater Manchester metro mayoralty as is expected in May (Wigan, the borough of which Leigh is part, voted 64 per cent for Brexit).

If he goes ahead and stands – which he may well do – he will have to overturn a Labour majority of over 14,000. That, even before the unedifying row over the veracity of his Hillsborough recollections, was always going to be a big challenge. If he goes for it and loses, his leadership – predicated as it is on his supposed ability to win votes in the north - will be dead in the water. 

Nuttall is not entirely to blame, but he is a big part of Ukip’s problem. I visited Stoke the day before The Guardian published its initial report on Nuttall’s Hillsborough claims, and even then Nuttall’s campaign manager admitted that he was unlikely to convince the “hard core” of Conservative voters to back him. 

There are manifold reasons for this, but chief among them is that Nuttall, despite his newfound love of tweed, is no Nigel Farage. Not only does he lack his name recognition and box office appeal, but the sad truth is that the Tory voters Ukip need to attract are much less likely to vote for a party led by a Scouser whose platform consists of reassuring working-class voters their NHS and benefits are safe.
 
It is Farage and his allies – most notably the party’s main donor Arron Banks – who hold the most power over Nuttall’s future. Banks, who Nuttall publicly disowned as a non-member after he said he was “sick to death” of people “milking” the Hillsborough disaster, said on the eve of the Stoke poll that Ukip had to “remain radical” if it wanted to keep receiving his money. Farage himself has said the party’s campaign ought to have been “clearer” on immigration. 

Senior party figures are already briefing against Nuttall and his team in the Telegraph, whose proprietors are chummy with the beer-swilling Farage-Banks axis. They deride him for his efforts to turn Ukip into “NiceKip” or “Nukip” in order to appeal to more women voters, and for the heavy-handedness of his pitch to Labour voters (“There were times when I wondered whether I’ve got a purple rosette or a red one on”, one told the paper). 

It is Nuttall’s policy advisers - the anti-Farage awkward squad of Suzanne Evans, MEP Patrick O’Flynn (who famously branded Farage "snarling, thin-skinned and aggressive") and former leadership candidate Lisa Duffy – come in for the harshest criticism. Herein lies the leader's almost impossible task. Despite having pitched to members as a unity candidate, the two sides’ visions for Ukip are irreconcilable – one urges him to emulate Trump (who Nuttall says he would not have voted for), and the other urges a more moderate tack. 

Endorsing his leader on Question Time last night, Ukip’s sole MP Douglas Carswell blamed the legacy of the party’s Tea Party-inspired 2015 general election campaign, which saw Farage complain about foreigners with HIV using the NHS in ITV’s leaders debate, for the party’s poor performance in Stoke. Others, such as MEP Bill Etheridge, say precisely the opposite – that Nuttall must be more like Farage. 

Neither side has yet called for Nuttall’s head. He insists he is “not going anywhere”. With his febrile party no stranger to abortive coup and counter-coup, he is unlikely to be the one who has the final say.