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Companies Going Out Out Of Business Because They Cannot Afford To Advertise? It’s Coming…..

 

The recent WSJ article, “How Covid-19 Supercharged the Advertising ‘Triopoly’ of Google, Facebook and Amazon,” is a must-read for business owners, advertisers and marketing managers.

It’s not because this article takes a deep dive into the rise of ad spend for these tech giants, dubbed the “Big Three.” And it’s not because it covers many major brands – including Mondelez International (the maker of Oreo cookies), Vuori Inc. (an athleisure company), and Steelcase (an office furniture maker) – going all-in on digital marketing. It’s not even because it covers new-business formations making a major shift to digital ad dollars because – believe it or not – these business owners say, “digital ad spend is cheap,” which we will talk about later.

No… the reason you need to read this article is to understand the new underpinnings of the ad spend marketplace; if you take out Amazon, which is only a small percentage of the “Big Three,” a digital spend land rush is coming. That means Google and Facebook will become your major advertising options. Sure, we can include Instagram (owned by Facebook) and YouTube (owned by Google). And yes, Twitter, LinkedIn, and Snapchat are all still players in the game, just very small players. But that still leaves only two major contenders for your ad dollars: Google and Facebook.

Understanding this is essential to understanding where the industry is heading. And, let me warn you right now, for many businesses (I’m looking at you B2B), this is downright frightening.

To better understand this scary situation, let me back up my prediction by digging deeper into the numbers. The Oreo brand has moved 50% of its $1.1 billion marketing budget to digital. Vuori (Yoga Pants) has eliminated all traditional spending and moved all budgets to Facebook/Instagram. Steelcase (office furniture) stopped advertising in business publications and radically increased its ad spend on Amazon search ads and paid social media. While these are just three diverse companies in the grand scheme of things, the numbers are important and clearly illustrate a major shift toward prioritizing digital advertising.

Currently, Facebook has 10 million advertisers on its platform, but when you compare that number to the 34 million small businesses in our country, the future grows bleak. Remember those startup business owners I mentioned earlier who loved digital ad spend because it was so cheap? What do they think the bidding environment will look like on Facebook when an already ad-heavy timeline gets to 20 million advertisers? What about when they get to 30 million? They will get there, that’s a guarantee. After all, that’s where everybody is; all eyes are on digital platforms, especially Google and Facebook.

Let’s take it one step further, what will it cost for companies to market on the “Big Three” platforms when major brands (like Oreo, with their $1.1 billion marketing budget) go from 50% digital to 90%? And what about the pharmaceutical industry, the largest advertisers in the world. Did you know they currently only spend around 12% of their marketing budgets on digital? What will happen when they start shifting their massive budgets to compete in digital advertising, specifically on Google and Facebook?

Add to all of this the fact that both Facebook and Google both use a business model that is designed to keep business owners and advertisers guessing at a proper marketing investment on their platforms (using the cover word “algorithm updates”) and you, as a business owner, have a serious problem on your hands.

Now, you may be wondering if there’s a solution to this problem. The answer is yes and no.

First off: no, you cannot stop this digital investment land rush, those days are long gone, and trying to out optimize a bad spend is as beneficial as lighting a pile of money on fire. That leaves the question of what can you do?

Well, for starters, you need to take your investment in digital marketing very seriously and take a hard and thorough look at how your customer acquisition cost is being allocated. Cut out the MarTech toys you’re not using, stop investing so much in vanity swag, and really examine what your salespeople are doing. Move the money you used to waste here over to digital. And do not guess at the proper distributions. Develop a concrete plan on how to allocate those funds. (I know a great company that can help you with that).

Next, start to think differently. Move outside the box and hire salespeople who have serious traction on LinkedIn or Twitter and are posting regular content. That content can be your content.

I will say this with 100% confidence, in the next 2-3 years, there will be companies that go out of business because they could not afford to market digitally. Don’t wait, don’t be that company. It’s time to stop fighting the trend or looking for cheaper platforms, Covid-19 has changed the game forever and we are not going back to where we came from. You have been warned.

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