The Duopoly Is Dead, ChatGBT vs. Bard, and Deinfluencing

In a world full of constantly changing technology and information, this monthly newsletter keeps marketers up-to-date on the latest trends that will impact their business. I hope you enjoy it!

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There has been much talk of recessions and spending reductions in the last few months, but according to the?Winterberry Group, the data does not back that up. Advertisers are expected to spend an estimated $509 billion in 2023, up 6% from last year. Around 60% of that will be in online channels, with CTV, influencer, and Digital OOH getting a growing share of those dollars. While, of course, there has been a deceleration in spending, we are still growing. For brands, don't let the talk of a recession influence your decisions - let data do that. Brands are still spending, and the ones that continue to invest will come out on top. Not only will they be top of mind, but they can also capitalize on inexpensive ad inventory from everyone who pulled back.??

So people are still spending, and brands are still spending. So what are they spending on???

1. ?Discounts: To encourage spending,?sales, and discounts?will be more readily available in early 2023. Most of these are flash sales or overstock sales. Sales will help brands sell through the product they overproduced and allows consumers to buy products at a discounted price. What is especially telling is that sales are even being run by brands that rarely offer discounts. However, approach with caution. Discounts are an easy and effective way to sell products but then train consumers to wait and look for discounts to buy products. As the economy is looking more steady in the upcoming months, we may see more brands ease off this tactic.
2. Resale including Luxury Resale: Luxury consignment platform?The RealReal?said that the resale value of high-priced handbags is falling while demand for lower-priced handbags is up. Shows that across the socioeconomic spectrum, consumers are looking to trade down to cut costs.??
3. Value & Multi-Use Products: Brands focus on affordability, putting a product's value at the center of its messaging. Consumers are mainly looking for multi-use products that can serve multiple purposes and products that are a good value for the cost.??

Adhering to the new trend of less is more and resale; there is a new trend going around TikTok of "deinfluencing" which is pushback against trendy and expensive products recommended and promoted by influencers.?Deinfluencing is a culmination of a few different things, including more budget-conscious consumers, an increased focus on?sustainability?(and a rally against consumerism), and?increased scrutiny?of mega influencers. For brands, if you are not marketing for the moment, you will look tone-deaf. Are you selling expensive luxury products with out-of-touch influencers? Focus on your product catalog that provides value or has multiple uses. Also, be aware of who you partner with; instead of mega influences, partner with actual creators aligned with your audience and values.??

Ok, for some Q4 revenue numbers, Meta's revenue was down 1% YoY. Some other notable stats were ad impressions were up 23% YoY, and ad prices were down 22%.?Overall it was their third quarter of declining sales due to sluggish demand. However, as we covered above, advertisers are still spending, but they are spending in different ways, with an increasing focus on creators, retail media, TikTok, and CTV. Meta is increasingly focused on its TikTok competitor, Reels, as well as the performance of its ad product. You can't count Meta out, as Facebook & Instagram still get a fair share of consumer interest and attention. However, brands are finally just diversifying their media mixes, which means some money has been pulled away from the Google, Amazon, and Meta triopoly.??

Google Advertising?fell 3.6%?YoY to $59 billion. The decline affected both Search and the once golden child YouTube.?The search business, in particular, is in a challenging spot, with 40% of younger audiences saying they use TikTok as a search engine (vs. Google) and increased interest in AI, including ChatGBT. Advertisers have yet to be?sold on TikTok?search, so it's not like that's where all the money is going. However, shifting consumer behavior makes advertisers more cautious about where they are spending. Google said they plan to turn this around by making shopping a core part of the shopping journey, increasing small businesses on Google, and adding new ad products.??

Google entered the chatbot market with the unveiling of Bard, their response to ChatGPT which will launch soon and allow users to search in a more conversation-forward way, just like Bing just announced (more on that below).?You can never count Google out. If they can move fast, they can mitigate loss here, but we won't know what happens until we see it in action. This slow, steady approach may be their attempt to make sure they get AI right, but it's also possible ChatGBT caught them off guard, and now they are fighting to keep up.???

To turn to the thorn in Google's side, ChatGBT, during a recent event, Microsoft debuted a new version of its Bing search engine running on a more powerful version of OpenAI's?ChatGPT.?Search has been the same for many years, and this is a new and fun innovation that Bing can move quickly on and hopefully steal some market share from Google. So now, instead of standard Search results, a user on Bing will get their standard search results plus AI answers to their questions allowing people to get an easy answer without having to troll through links. Bing hopes this new easy-to-use platform will increase users' use of Bing but take into account the power of consumer behavior. We say Google it. Google is the default search engine for many, and it may take more than this to get users to switch. However, you may see early adopters and tech-focused consumers move toward Bing to try it out. If you are a brand, ensure you keep a close eye on your Bing spend and performance and be ready to flex up if necessary.??

Amazon's?Q4 results were a mixed bag as it beat revenue expectations growing 9% YoY but saw a decline in e-commerce revenue dropping by around 2%. However, the bright spot (as always) is in its advertising business which grew by 19%.????

Concerning that Amazon saw some declines, but I'm not alarmed. I'm tracking two different things.??

1. ?The macroeconomic climate for online shopping is different, and Amazon's decline is more telling of the overall online environment than Amazon's performance. Amazon is a good indicator of broader shopping behavior, so keeping an eye on their growth (or lack of growth) gives us a good pulse on the broader climate.??
2. Consumers are increasing the number of places they buy from, including in-store, and with their quickly growing competitive set, including Walmart & Target. Walmart and Target have done an excellent job diversifying their marketplace offering and are growing. Amazon may be losing some of its market share to other marketplaces. Amazon has gotten some negative press for not adhering to two-day free shipping and feeling increasingly?junky.??

Overall, Amazon should not be too worried; however, it's something to continue to track.?

Retail media prices are down 12% YoY, according to Skai. Retail media has seen massive growth in advertiser adoption, spending (up 45% YoY), and available inventory (61% increase in impressions).?However, the reason for the decrease is cost is that the number of impressions is growing at a rate that is?faster than advertiser adoption. This is a great time to increase investment and take advantage of some lower-cost inventory. Retail media networks are increasingly making their platforms easy to use with more exciting and performance-focused ad products, which will continue to increase advertiser adoption, increasing the prices over time. However, for now it may be a good time to strike while the iron's hot.??

In Q4, Netflix saw an increase of 7.7 million subscribers beating its expectation. However, much of its base and the new subscribers are not buying into the ad-supported basic plan.?Existing users are used to an ad-free experience, and a lower price won't necessarily win them over. Especially as Netflix is considered one of the core streaming platforms that consumers subscribe to always. While there is always an opportunity for an increased focus on savings to change this dynamic, it is unlikely in its current state. There has also been a focus away from big studio-produced content from prominent streamers to more quick and easy content. This decrease in quality could convince a consumer they no longer need to pay to subscribe; however, if that's the case, Netflix may also lose the audience altogether. Netflix wants ads to make up 10% of its overall revenue, but so far, they need to catch up, with only?600,000?monthly active users for its three-month-old advertising option vs. 73.4 million total subscribers. So how else will they plan to get more ad-supported subscribers? By forcing their hand, of course, Netflix has?unveiled?its plans to prevent password sharing between people in households outside of an account owner's primary location. Of course, they rolled it back as soon as the outrage started. However, this is not the last we will hear of that. Price increases on subscriptions and decreasing password sharing will be the two levers they continue to pull at to see if they can increase ad-supported revenue. This is also not a Netflix issue but a CTV issue. All platforms are getting pressure from brands to spend more and they can only do so with more ad-supported customers. It's increasingly clear that CTV is the next big medium to reach consumers. If you still need to test into CTV, it is time before everyone jumps on board.??

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Megan Conahan is a 17-year veteran of the digital marketing industry. Over the last 17 years, she’s consulted with fortune 1000 brands on how to best negotiate the ever-changing digital marketplace demands and create unique solutions to set them apart. Megan is an EVP at Direct Agents, an independent and minority-owned digital marketing agency.?