Google, Facebook and Amazon collect more than half of all ad dollars spent in the U.S.
7 min
When the pandemic upended the economy last year, companies took a hard look at their advertising plans.
Oreos maker Mondelez International Inc. shifted money meant for TV commercials during March Madness basketball and the summer Olympics into digital platforms. A hefty chunk went to Alphabet Inc.’s Google, which offered data on what locked-down snack lovers were searching for.
Athleisure company Vuori Inc. more than tripled its spending on Facebook Inc., spotting a chance to juice sales of its sweatpants to people stuck at home. Office-furniture maker Steelcase Inc. built an operation to sell directly to workers and advertised aggressively on Amazon.com Inc.
The Big Three of digital advertising—Google, Facebook and Amazon—already dominated that sector going into 2020. The pandemic pushed them into command of the entire advertising economy. According to a provisional analysis by ad agency GroupM, the three tech titans for the first time collected the majority of all ad spending in the U.S. last year.
Beneath the shift are changes driven by the pandemic: more time spent on computer screens; more e-commerce; a jump in new-business formation, and a steady improvement in tech giants’ ability to demonstrate a return on ad investment.
Success breeds success for what some call the “triopoly.” The increase in shopping and spending on Google, Facebook and Amazon’s platforms is adding to their already voluminous data on users, giving them even more appeal for advertisers that look to target their messages.
“These companies that are data-science-driven get stronger and faster with a tailwind of usage—and Covid was a hurricane,” said ad-industry veteran Tim Armstrong, a former Google executive and AOL CEO who now leads Flowcode, a direct-to-consumer platform company.
Many of the pandemic-driven changes likely are here to stay, say advertisers and ad forecasters. Still, when the pandemic winds down, it’s far from certain the tech giants will continue to increase their market share gains at this rate. With the vaccine rollout and easing of lockdowns, consumers could spend less time and money online and marketers could diversify their spending.
The growth in online advertising last year came as every other kind of ad spending shrank, with double-digit declines in television, newspapers and billboards, according to GroupM. And those online gains flowed heavily to the tech giants rather than to digital media sites and publishers that sell online ads.
The triopoly increased their share of the U.S. digital-ad market from 80% in 2019 to a range approaching 90% in 2020, GroupM estimates. It’s a surge that comes as the three face scrutiny and litigation from various agencies at home and abroad over their dominance.
Google, in announcing plans to tweak its tools that help publishers and advertisers buy and sell ads, is moving away from targeting ads based on individuals’ browsing activity across the web. But that shift might wind up further strengthening Google’s grip on the online-ad industry, some experts and rivals say, because it could boost the value of the data flowing through Google properties such as Search and YouTube.
Amazon this week said it will begin streaming Thursday Night Football by 2023, giving the company a high-profile franchise to take in ad dollars normally spent on TV broadcasters.
The three giants aren’t collecting just the money spent to advertise in the media but also some of the marketing dollars earmarked for coupons, catalogues and in-store promotions.
“They are not media companies anymore, they are marketing mongrels,” said Rishad Tobaccowala, a senior adviser to ad giant Publicis Groupe SA.
New-business applications in the U.S., which slowly climbed from 200,000 a month to 300,000 over a decade, shot up north of 500,000 in July and averaged more than 400,000 a month for the second half of 2020, according to the U.S. Census data. This proved a boon for the biggest tech platforms, which provide the kind of advertising that is often all a startup can afford. Facebook says it had more than 10 million active advertisers in the third quarter, up from 8 million in January.
Meanwhile, many businesses of all sizes pivoted to e-commerce selling—and turned to digital ads to support that effort.
Before the pandemic, a little more than 10% of retail purchases in the U.S.took place online. That jumped to 16% in last year’s second quarter when lockdowns peaked, according to Census data. Though the rate tapered a bit as the year wore on, the trend strongly benefits the tech behemoths.
“The pandemic zapped us two years into the future on the e-commerce side,” said Nicole Perrin, principal analyst at research firm eMarketer.
Mondelez, the Chicago-based maker of Oreo, Ritz and other snacks, in 2020 geared up to promote some of its brands in the marquee television events of the NCAA college basketball tournament and the Summer Olympic Games in Tokyo. When it became clear neither would be held, Mondelez redeployed the money to digital advertising.
It doubled down on Google ads to capitalize on interest in online recipes among those homebound. It used Facebook-owned Instagram to host a Pictionary-like game in which an artist made images out of the cream in the middle of an Oreo cookie. For the first time, Mondelez spent more on digital ads than on TV commercials last year. Google and Facebook were the biggest beneficiaries.
This year, digital advertising is projected to account for more than half the roughly $1.1 billion Mondelez spends on media world-wide. It was only about 30% as recently as 2017. TV’s share of the company’s ad spending continues to decline.
When Mondelez invests in digital advertising, it gets a 25% better return than with TV ads, the company says. It has found that its Google and Facebook ads do especially well, generating 40% higher returns than an average digital ad. The two now account for roughly 60% to 70% of Mondelez’s digital ad spending, up from less than 50% in 2017, the company says.
The tech giants share data that allows Mondelez to understand its customers better, said the snack maker’s chief marketing officer, Martin Renaud. Google data showed Mondelez, for instance, that people tend to search the internet for healthier snacks in the morning and for more-indulgent treats as the day wears on.
When the pandemic struck, Google provided updated data that helped Mondelez craft relevant ads. The company switched from showing college-age consumers an ad about eating lunch in the library to one that read: “Made it through an online class? Treat yourself.”
Mondelez has been working with Google and Target Corp. to figure out how likely someone is to buy Oreos or Ritz crackers from Target stores after being served ads for them on Google’s YouTube.
“I can’t go to CNN or other platforms and be able to get that intelligence,” said Jonathan Halvorson, Mondelez’s global vice president of consumer experience. Big advertisers like Mondelez still spend a lot on TV commercials, and most consider TV the best way to reach a mass audience, rather than any particular segment of consumers.
As it directs more ad money to the tech giants, Mondelez isn’t working with as many digital publishers in the U.S. In 2017, Mondelez worked with about 150; it now works with fewer than 10.
For direct-to-consumer businesses, the pandemic provided an opportunity like no other.
Activewear company Vuori distributes through stores, but its main focus is selling via catalogues and the web. Facebook is a key part of its strategy. Besides enabling Vuori to monitor the performance of its ads, the platform’s tools let Vuori upload lists of its customers and then use Facebook’s algorithm to find look-alike audiences, testing and pivoting in real-time.
When the pandemic arrived, Vuori CEO Joe Kudla noticed something interesting in the data: The prices of Facebook’s ads were dropping at the same time as people were clicking at higher rates on Vuori ads for items like its $80 sweatpants. That combination sent its return on ad spending through the roof.
Vuori stopped traditional marketing such as catalogues and direct mail and shovelled every dollar it could into Facebook. It doubled its April 2020 media spending from what was budgeted and saw sales quadruple. Facebook’s ad prices have since recovered, and Vuori has diversified its ad spending somewhat, but it has continued to increase its use of Facebook ads.
A surfer and yoga practitioner, Mr Kudla seeks to create products for people with the kind of active lifestyle he and his friends in Encinitas, Calif., have. But for finding customers, he says, Facebook beats his instincts.
“We could identify the age, demo and behaviour, but ultimately the algorithm is much more powerful in terms of identifying people who demonstrate certain shopping behaviours,” Mr Kudla said.
Performance-obsessed small advertisers such as Vuori are the reason Facebook revenue never stopped growing last year, despite the pandemic’s hit to the economy and then a summer boycott by some prominent advertisers over the platform’s handling of hate speech and misinformation.
In the three years leading up to the pandemic, Suzy Batiz, founder of the toilet spray company Poo-Pourri, was focused mainly on building out the network of retail stores that carried what it calls a “before-you-go” spritz of essential oils.
Then Covid-19 hit, and one distributor refused to take a multimillion-dollar order already produced. “That was pretty painful,” Ms Batiz said. “But as one of my mentors would say, crisis precedes transformation.” The company shifted focus from driving customers to stores to driving them to its e-commerce site and others’ shopping sites.
That meant cutting all marketing spending that wasn’t digital, such as payment for placement at Bed Bath & Beyond stores or for promotional events. Ms Batiz redirected the money to the web, especially Facebook. Sales on Poo-Pourri’s website surged 300% in the second quarter versus a year earlier and more than doubled for the year.
“This is our future,” Ms Batiz said. “I don’t think we will ever go back.”
Steelcase, which makes desks and other office furniture, spent roughly $1 million on advertising in 2019, primarily for print and digital ads in business publications to target facility managers, architects, developers and company executives. Most of its revenue came in direct sales to corporations or from its dealer network, which has showrooms around the country. Its business of direct selling to consumers was minuscule.
As states’ stay-home orders spurred an exodus from offices last spring, Steelcase’s sales plunged. The Grand Rapids, Mich., company ramped up its small direct-to-consumer business, increasing its staff for that to 25 people from two.
It stopped advertising in business publications and began buying search and social-media ads. Steelcase radically increased its ad budget last year and spent $5 million to $6 million on digital ads targeting people setting up home offices. About half of that went to Amazon search ads.
“Everyone focused on Amazon, whether you needed toilet paper, spices, a Cuisinart mixer or an office chair,” said Allan Smith, the furniture maker’s vice president of global marketing. “We decided to shift there as well, and it paid off.”
For every dollar Steelcase spent on Amazon ads during the holiday season, it made $30 in sales, the company says. Sales for its business aimed at consumers are up 500%.
Steelcase plans to double its Amazon spending this year. Its research indicates the pandemic has changed work-life for good, predicting that about 72% of businesses are likely to take a hybrid approach of working from both home and office. “The hybrid future is here to stay,” Mr Smith said.
Reprinted by permission of WSJ. Magazine. Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: March 19, 2021
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The lunar flyby would be the deepest humans have traveled in space in decades.
4 min
It’s go time for the highest-stakes mission at NASA in more than 50 years.
On April 1, the agency is set to launch four astronauts around the moon, the deepest human spaceflight since the final Apollo lunar landing in 1972.
The launch window for Artemis II , as the mission is called, opens at 6:24 p.m. ET.
National Aeronautics and Space Administration teams have been preparing the vehicles to depart from Florida’s Kennedy Space Center on the planned roughly 10-day trip. Crew members have trained for years for this moment.
Reid Wiseman, the NASA astronaut serving as mission commander, said he doesn’t fear taking the voyage. A widower, he does worry at times about what he is putting his daughters through.
“I could have a very comfortable life for them,” Wiseman said in an interview last September.
“But I’m also a human, and I see the spirit in their eyes that is burning in my soul too. And so we’ve just got to never stop going.”
Wiseman’s crewmates on Artemis II are NASA’s Victor Glover and Christina Koch, as well as Canadian Space Agency astronaut Jeremy Hansen.
What are the goals for Artemis II?
The biggest one: Safely fly the crew on vehicles that have never carried astronauts before.
The towering Space Launch System rocket has the job of lofting a vehicle called Orion into space and on its way to the moon.
Orion is designed to carry the crew around the moon and back. Myriad systems on the ship—life support, communications, navigation—will be tested with the astronauts on board.
SLS and Orion don’t have much flight experience. The vehicles last flew in 2022, when the agency completed its uncrewed Artemis I mission .
How is the mission expected to unfold?
Artemis II will begin when SLS takes off from a launchpad in Florida with Orion stacked on top of it.
The so-called upper stage of SLS will later separate from the main part of the rocket with Orion attached, and use its engine to set up the latter vehicle for a push to the moon.
After Orion separates from the upper stage, it will conduct what is called a translunar injection—the engine firing that commits Orion to soaring out to the moon. It will fly to the moon over the course of a few days and travel around its far side.
Orion will face a tough return home after speeding through space. As it hits Earth’s atmosphere, Orion will be flying at 25,000 miles an hour and face temperatures of 5,000 degrees as it slows down. The capsule is designed to land under parachutes in the Pacific Ocean, not far from San Diego.
Is it possible Artemis II will be delayed?
Yes.
For safety reasons, the agency won’t launch if certain tough weather conditions roll through the Cape Canaveral, Fla., area. Delays caused by technical problems are possible, too. NASA has other dates identified for the mission if it doesn’t begin April 1.
Who are the astronauts flying on Artemis II?
The crew will be led by Wiseman, a retired Navy pilot who completed military deployments before joining NASA’s astronaut corps. He traveled to the International Space Station in 2014.
Two other astronauts will represent NASA during the mission: Glover, an experienced Navy pilot, and Koch, who began her career as an electrical engineer for the agency and once spent a year at a research station in the South Pole. Both have traveled to the space station before.
Hansen is a military pilot who joined Canada’s astronaut corps in 2009. He will be making his first trip to space.
Koch’s participation in Artemis II will mark the first time a woman has flown beyond orbits near Earth. Glover and Hansen will be the first African-American and non-American astronauts, respectively, to do the same.
What will the astronauts do during the flight?
The astronauts will evaluate how Orion flies, practice emergency procedures and capture images of the far side of the moon for scientific and exploration purposes (they may become the first humans to see parts of the far side of the lunar surface). Health-tracking projects of the astronauts are designed to inform future missions.
Those efforts will play out in Orion’s crew module, which has about two minivans worth of living area.
On board, the astronauts will spend about 30 minutes a day exercising, using a device that allows them to do dead lifts, rowing and more. Sleep will come in eight-hour stretches in hammocks.
There is a custom-made warmer for meals, with beef brisket and veggie quiche on the menu.
Each astronaut is permitted two flavored beverages a day, including coffee. The crew will hold one hourlong shared meal each day.
The Universal Waste Management System—that’s the toilet—uses air flow to pull fluid and solid waste away into containers.
What happens after Artemis II?
Assuming it goes well, NASA will march on to Artemis III, scheduled for next year. During that operation, NASA plans to launch Orion with crew members on board and have the ship practice docking with lunar-lander vehicles that Elon Musk’s SpaceX and Jeff Bezos’ Blue Origin have been developing. The rendezvous operations will occur relatively close to Earth.
NASA hopes that its contractors and the agency itself are ready to attempt one or more lunar landing missions in 2028. Many current and former spaceflight officials are skeptical that timeline is feasible.
