The Rise of Social Advertising

Andrew Harrer | Bloomberg | Getty Images

The trend to social content-driven advertising and the collapse of direct-sold banner advertising is becoming increasingly evident in management discussions on earnings calls.

Goldman Sachs in their February 7th note, has characterized a concave ad curve that will characterize the display market: high demand for cheap direct response banners bought programmatically, high demand for custom units and premium campaigns with content elements, nothing in the middle.

Two earnings calls this quarter, one from the New York Times and one from Linkedin have some nice discussion of these issues.

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On the New York Time's fourth quarter call, James Follo, CFO explains:

Digital display advertising continued to experience challenges, including a glut of available ad inventory in the market and the resulting downward price pressure, as well as a shift towards ad exchanges, real-time bidding and other programmatic buying channels.

While such audience-targeted approaches have begun to impact premium pricing for advertising environments, such as, we believe The Times Media Group can return to digital growth by focusing more heavily on unique custom ad units, an area where we already stand out, monetizing tablet inventory as our audience on that platform grows and making significant inroads in video advertising as our content offerings there multiply.

This was a reiteration of the same message from the Q3 call - which can be simply described as: the market for banners is increasingly moving electronic, not unlike stock trading, and the opportunity for publishers and media companies rests in doing advertising that is more engaging, content-driven, and social from the ground up.

The banner, which has been unchanged for 18 years, has never been a good product for brand advertising and this is finally starting to show up in corporate performance. Look no further than the Washington Post Company which has moved into content-driven advertising as well just this week.

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In contrast, take Linkedin CEO Jeff Weiner's comments from his last earnings call:

I think one of the things that we are increasingly focused on in 2013 is going to be the opportunity to support content marketing and I was just talking a little bit about that in terms of the examples where companies are able to leverage content repositories they have already built up for the sake of generating leads and targeting prospects.

One of the things where we are making one of the areas we are making strong traction in is LinkedIn as a professional publishing platform. And you see with the momentum we are generating now with LinkedIn influencers, LinkedIn groups, SlideShare, people are increasingly turning to LinkedIn to publish professionally relevant content, and we think that's going to create a very strong platform and very valuable context for large enterprises, for small medium sized businesses who want to target and engage with professionals.

The days of publishers and media companies using direct sales forces to sell banners are numbered. Online media companies will perform the brand advertising function in the future through rich, brands-as-publisher, content centered campaigns.

This isn't the future any more, it's the present, and we are seeing it arrive on Wall Street.

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Jon Steinberg is the President and COO at BuzzFeed in NYC. He was previously Strategic Partner Development Manager on Google's SMB (Small Medium Business) Partnerships team. Prior to Google, Jon was the Director of Business Development at Majestic Research and the founder of iBuilding, a commercial real estate software company backed by Tishman Speyer Properties, Benchmark Capital, and 12 Entrepreneuring.