Tech Giants Make A Killing From Contextual Advertising, But They’re Not In The Media Business

Adweek’s deputy editor, Chip Bayers, sounds off in his cover story on some of today’s biggest media companies masquerading as tech companies. Google and Facebook, in particular, have a problem with the media company label, for it means their businesses are based on selling ads, not technology solutions.

As one might imagine, thinking of themselves as media companies goes against the grain in a culture founded by engineers.

Advertisers are used to having a symbiotic relationship with traditional media partners, and each side understands the other’s roles. The media partners build content and charge premium prices to appear alongside it; the marketers get their desired audience(s)—consumers willing to pay for their brands. That symbiosis hasn’t developed yet in digital, however, and agency executives can sometimes sound like they’ve reached a breaking point in their frustration with Silicon Valley’s refusal to claim the media mantle and fully embrace advertising as their raison d’être. “[They’re] the new media owners, masquerading as technology companies,” WPP chairman Martin Sorrell recently told Adweek.

The reason they haven’t behaved like media companies, yet, has a lot to do with the culture of where they’re based. Indeed, the engineers and the engineering culture of the Valley have always had a certain distaste for advertising, and for advertising salesmen (the kind of people who usually end up running media companies)—too messy, too intrusive, and, worst of all, too dumb.

Bayers also explains the economics of the situation.

Underneath a veneer of success, the digital media industry as a whole has masked a growing existential crisis. CPMs on the Internet continue to drop like a stone, and most brand advertisers have resisted moving their dollars into digital, to the point that a now infamous $60 billion gap has opened up—the amount of additional money that, given the amount of time consumers spend with the medium, say industry analysts, advertisers should be spending on interactive media today.

In 2009, Procter & Gamble devoted just seven percent of its ad budget to digital; at Unilever it was three percent, according to IAB figures. Bayers reasons that brand managers don’t want their ads caught anywhere near much of the existing online inventory, derived as it is from the direct marketing world of junk mail.

The context problem is an interesting one to my mind. On one hand, we have all sorts of consumer-empowerment evangelists praising the freewheeling rise of push-button publishing. On the other hand, we have big brands with money to spend, hesitant to do so because of how messy and out of control the web is.

It’s also worth noting that while agencies are striving to build out their digital capabilities, TV is still the core of the business.