I love advertising – particularly digital advertising. There, I said it. Was that so hard? Well, yes, the industry I’ve partnered with for more than three decades can be very difficult to defend – and the past ten or fifteen years have been particularly bad. I’m tempted to say that everything after Google Adwords was a net negative in the world, including Facebook, which was the bastard child of Google, and even the open web and programmatic advertising (a development I’ve previously called “heroic” and “the greatest single artifact of humankind”).
It’s fair to say I have a complicated relationship with what’s come to be called “ad tech” – we developed the first ad servers and banner ads at Wired in the 1990s, I wrote a book about the business and its breakout star (Google) in the early 2000s, I started an advertising-driven open-web business that nearly reached escape velocity around the same time, I still chair an adtech and data-driven descendant of that business today, I’ve work closely with the largest advertiser on the planet for nearly 15 years, I sit on the board of LiveRamp, an essential component of today’s digital marketing ecosystem, I’ve started or advised or invested in countless media companies – most of which are dependent on advertising in one form or another.
So yeah, I love advertising. And I kind of hate it too. With those caveats now duly noted, let’s get into what might be some of the most important developments in the space over the coming year.
First, let’s talk the elephants in the room: Apple, Amazon, Google, and Meta. Remember when they seemed immutable characters in some Marvel franchise – dubbed “The Four” by Prof. Galloway? Five years in, each of those companies has their share of worldly troubles, but no one paying attention would argue they’re going anywhere soon. They’re still four of the most valuable companies on earth, though Facebook (nee Meta) has really been working hard at failing these past few years. So what will happen with them this coming year?
Throughout 2023, we’ll hear talk of “the new duopoly” – Amazon and Apple. Both have far smaller advertising businesses than either Meta or Google, but Amazon and Apple have strategic advantages that will allow them to steal significant share: They are much closer to the consumer than their rivals. Apple, of course, owns a massive consumer data platform (iOS and the iPhone), and despite the insanely great contradiction inherent in a “privacy” company building a data-driven advertising business, Apple will likely grow past $10 billion in advertising revenues in 2023. (I’d write thousands of words on the hypocrisy of Apple crippling the entire ad tech ecosystem even as it becomes what it claims it hates, but for now others have done a far better job). Regardless, Apple will be a major digital advertising story next year.
So will Amazon. Here’s another player with a superior data – this company knows what you look at, what you covet, and what you buy. That’s pretty much the entire bottom of the funnel, and over the past five years, Amazon has quietly built a $30+billion advertising business on top of it. Expect that to grow to nearly $40 billion in 2023 – and spark a wave of competitors in what is now known as the “retail media” business – advertising networks built on top of retail and consumer data (Target, Walmart, and many others have already built such businesses, and while they are viable, they pale in comparison to Amazon’s capacities).
Combined, Amazon and Apple will likely grow $15 billion or more in revenue in just one year – and that growth will come largely at the expense of its “Big Four” rivals Google and Facebook, each of which need tens of billions in growth each year to support their sagging stock prices. Expect one hell of a war between these four in 2023.
Next up in the advertising related predictions: Netflix. I’m sure you’ve been following the Netflix Finally Capitulates To The Advertising Model story, but just in case, here’s a primer. For more than a decade Netflix stood on holier-than-thou ground, claiming it would never allow advertising on its platform (that’d be the Netflix CEO in 2020). Industry folk predicted Netflix would start selling ads regardless (that’d be me, also in 2020). 2022 proved the year it happened. Given the press loves a good “I told you so” story, initial reviews of Netflix’s advertising business launch were laden with loving spoonfuls of schadenfreude. “Tepid,” wrote Variety, arguably the most important industry voice in Netflix’s world. “Least popular,” sniffed the Wall St. Journal, noting, of course, that Netflix’s stock has plummeted over the past year. “Giving money back to advertisers,” gloated Digiday.
So what will happen in 2023? By year’s end Netflix’s experiment in advertising will be seen as a triumph. No company is more motivated, more data-driven, and has hired more accomplished industry veterans than Netflix, and if anyone is going to figure out what has so far been a total shitshow (that’d be the connected television market), it’s going to be Netflix. They’ll test, experiment, fail, learn, test some more, and figure out exactly how many ads each of us will tolerate, and they’ll translate that consumer sentiment into data-laden, at-scale advertising products that brand marketers will buy on sight. By this time next year, those spoonfuls of schadenfreude will have turned into paeans of praise.
And finally, Twitter. Oh, Twitter. In past years I’ve focused lengthy posts on Twitter – what the company should do, what it should avoid, who should buy it. Not this year. This year I’m focusing my predictions solely on one thing: Twitter’s mortality. Which is to say, the business that once constituted 90 percent of its revenue base, advertising, is perilously close to death. Given the company is no longer public, it’s impossible to know how badly Space Voldemort has damaged Twitter’s once-sterling reputation amongst many in the advertising business. However, insiders I’ve spoken to estimate Twitter’s US business, which is its largest, is down more than 60 percent year on year. Rough math would therefore put Twitter’s annual revenues – on track to be more than $5 billion in 2022 – at something like $3 billion on a go forward basis. That makes its consumer data business insanely important – Twitter’s data sales are a nearly half-billion-dollar profit driver that almost no one understands. So here’s my prediction: In 2023, Elon will tire of Twitter, driven as much by the reality of his waning wealth at Tesla (prediction #8, here) as by the sheer biological reality of endorphin fatigue. He’ll hire a real CEO who commands respect in the ad world, contractually obligate himself to not meddle, and find some way to claim victory in what will otherwise become a world-class Harvard Business School Case in What Not To Do. Given all this, in 2023 Twitter will rebound, and by the end of the year, the stories will about the miraculous rebirth of The Bird, because, well, that’s always been Twitter’s story.
So there are three more predictions for 2023: A war between duopolies, a Netflix comeback, and Twitter’s phoenix rising. My first post, which focuses on AI-based predictions, is here. My third, focused on markets, is here. And the summary of all of them is right here. Thanks for reading!
This is the second in a series of posts exploring my 2023 predictions. Previous predictions: