By James RaganIn a bid to counter growing competition from online giants such as Facebook, Google and Amazon, ad networks and content creators are using creative new ways to make money.
Key points:Advertisers have increasingly turned to digital content as their main source of incomeWhile the ad industry has seen an influx of ad revenue from social media platforms such as Instagram, Facebook and Twitter, the digital platforms themselves are losing money from ad impressions on their sitesAs ad networks have increasingly moved to digital monetisation, they have also been losing revenue from their own sites, according to an independent report commissioned by digital publishers.
The report, published by the advertising industry body AdExpert, found that digital ad revenues had fallen by about 40 per cent over the past year.
It also found that the ad network industry had been losing around £1.6bn to digital ad revenue in the UK, with digital revenues increasing by more than 50 per cent in the past 12 months.
AdExpert chairman Chris D’Ambrosio said the report was a sign that ad networks were struggling to adapt to the digital world and it was a key reason why they were losing money.
“Advertiser confidence in digital advertising is at a record low, with almost half of all ad spend now coming from mobile phones,” he said.
“The digital ad industry is struggling to meet ad spending needs and we need to start thinking about what new ways ad spend can be targeted to new audiences.”
If the industry is to remain competitive, it needs to adopt a new approach to digital advertising, a strategy that puts digital content first and not advertising.
“In our view, this report will give us the opportunity to develop a strategy for the future of digital advertising.”‘
We’ve got the new technology’The study found that many of the ad platforms that have been trying to attract more money have failed.
It said: “The major ad networks that are now taking digital advertising seriously have not been able to match the rapid growth of social media and mobile ad spend, with only a few ad networks making significant headway.”
Digital is the dominant form of advertising in many countries, but it has not yet been able in the digital advertising industry to compete effectively with traditional media.
“The report also said that the new mobile ad platform AdWords was also facing difficulties in reaching consumers, with a large proportion of users opting to use other means of buying online, such as mobile wallets and vouchers.
Advertising is not the only area where digital is struggling.
The study said that digital advertising spending was falling in a number of areas, including social media, search and mobile advertising.
AdSense, which operates on Google, Facebook, Twitter and YouTube, reported revenue of £1bn in the quarter ended March, down from £2.4bn the previous year.
However, it said it was not yet profitable and warned that digital revenues would not recover to pre-recession levels.”
We are in the midst of a rapid transition from an advertising business model that relies heavily on advertising, and we are seeing a lot of this growth in the mobile space,” said Adrian Beech, AdSense’s chief executive.”
While this may seem like a great opportunity for the industry, we have to be realistic about where we are in that transition.
“Our biggest challenge right now is how to compete with digital and make sure that we have the right technology, the right scale, the new ad formats and a well-designed platform to help us compete.”
The ad network report said that Google’s ad network had seen an increase in ad spend from about 2.5 per cent to 4.4 per cent, while Facebook’s AdSense had increased by a similar amount to 4 per cent.
Google said that in the last financial year, AdWords revenue had grown by almost $1bn.
It added that it had a good track record for delivering digital ad impressions.
“This year, we’ve seen a significant increase in AdWords, particularly from the mobile advertising market, as well as a significant improvement in our ability to target the right audience with our ad formats,” said a spokesperson.
“There’s been a significant shift in how we are working with advertisers in a bid for more value and more opportunities.”
Advertisors also said they were seeing significant decline in clicks, clicks-per-second, and organic clicks, which measure the number of people who see a given ad.
“As ad budgets have shrunk, we are losing revenue at every step in our digital strategy,” said Advertisers UK chief executive Andrew Taylor.
“It’s frustrating for a business which has traditionally been a strong driver of revenue growth in our industry, and it’s not good news for businesses that are trying to grow.”
“The ad networks need to recognise that they are in a tough spot,” he added.
“They have the technology to deliver quality ads, but the new digital advertising methods