Think of some major products, companies, and industries that have weakened or ceased to be in the past decade, mostly due to the awesome power of disruptive innovation. Movie rental stores? Gone. Brick-and-mortar booksellers? Teetering while Amazon cackles. Even previous disruptors like MP3 players and cordless phones have found themselves on the other end of the spectrum.
How long until television as we know it joins these fallen juggernauts?
Most of the television you enjoy is propped up by advertising revenue. Major companies and corporations shell out massive amounts of cash to try and catch your eye during commercial breaks. For the longest time, this system has thrived because television has been the most effective space for advertising. That hasn’t changed, or at least it hasn’t changed yet. As Lara O’Reilly writes over at Business Insider, several pieces of evidence suggest we may be heading toward a very different future — one that should make TV execs extremely wary.
O’Reilly begins with a quotation from Facebook COO Sheryl Sandberg, delivered during Facebook’s Q1 earnings call. In short: Sandberg explains how successful the company has been in providing marketing tools for small-to-medium businesses (SMBs) in the form of video ads. Over a million SMBs have bought video ad space from Facebook. That’s when Sandberg says the words that O’Reilly argues should frighten major TV execs:
“And that’s pretty cool because I don’t think there are probably 1 million advertisers who have bought TV ads in that same period of time.”
O’Reilly does great work communicating Facebook’s long-term vision for revolutionizing the ad world: Investment in analytics, the development of conversion-tracking technology, and the testing of a “Buy” button to join the ranks of its “Like” and “Share” compatriots. Smaller companies that can’t afford a major TV marketing campaign are able to make up for that through effective online advertising, and Facebook is working to foster its relationships with these companies. As O’Reilly notes, that sort of brand loyalty will come in handy if some of those SMBs grow up to be the next major industry giant.
Most important is O’Reilly’s research that suggests the skyrocketing profitability of internet advertising arrives at a time when TV ad revenue is down. She posits that we’re at the beginning of a major transition in which companies like Facebook will enter into direct competition with TV networks that have for decades been stalwarts of advertising. Could this really end up being the case?
The answer is we don’t know. While Facebook benefits from being a hugely popular website with 18% of the world’s population as members, TV has something the internet will never have: the Event. Super Bowl. Oscars. The series finales of Breaking Bad, or Lost, or whatever. Exclusive sporting event broadcasting rights. Aside from the fact that you can zip right past the commercials if you choose not to watch them live, TV still holds a distinct advantage in this realm.
But who knows? All this could change in an instant in the era of exponential technology and disruptive innovation. All we can be certain of is that the television advertising industry as we know it may need to think up strategies for dealing with something they’re not entirely used to: a competitor.
Read more at Business Insider.
Big Think expert Andrew Keen isn’t so keen on Facebook’s current business model, in particular its advertising business. He explains why in the video below: