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Appendix N: understanding advertiser demand for digital
advertising
Introduction
This appendix seeks to understand advertiser demand for digital advertising by looking into the behaviour and characteristics of advertisers who purchase digital advertising from Google and Facebook.
We first explore the characteristics of advertisers who use Google and Facebook to purchase digital advertising based on information from 2019 data, looking at customer distribution, information on the industries the advertisers are present in, and campaign shares.
We then consider how advertisers make the choice of the appropriate form of advertising, looking at the key performance indicators advertisers may have, the choice of digital advertising, and the substitutability between different forms of advertising. Next, we discuss some further choices made by advertisers once they have chosen to purchase digital advertising, and discuss the role that the advertising interface plays, the services media agencies can provide to advertisers, and the thought process behind planning a campaign.
We then set out the journey advertisers go through when purchasing search advertising on Google Ads and display advertising on Facebook Ads Manager. We discuss the process of creating a campaign and the options presented to advertisers throughout, bringing in advertiser views on these choices.
We then consider the transparency of Google’s and Facebook’s advertiser interfaces, and discuss some default settings in the interface and how these might affect advertiser behaviour. In addition, we discuss advertiser views on the extent of the information provided to the advertiser in the interfaces, the transparency of the auction process, costs and advertiser control over their budget.
This appendix combines several pieces of evidence to inform our views, including customer list data from Google and Facebook, views expressed by media agencies and large advertisers through information requests and calls, qualitative research that we commissioned to obtain further views from mostly smaller advertisers, our own desk research of the advertising interfaces, and responses from Google and Facebook to our information requests.
Advertiser characteristics
To investigate the characteristics of Google’s and Facebook’s advertiser customers, we have undertaken a descriptive analysis of advertiser and industry distribution and campaign shares. We have conducted this analysis on data submitted by Google and Facebook on their customer lists. There are two important factors to note regarding the customer list data that this analysis is based upon:
The basis for which customers, and their associated campaigns, impressions and spend on the platforms, were included in the lists supplied by each company were not consistent with one another.
The basis for which customers, and their associated campaigns, impressions and spend on the platforms, were included in the lists supplied by each company were not consistent with the way we have defined the UK markets for search and display advertising in our analysis in Chapter 5. This means that the absolute values for total advertising spend on each platform in search and display advertising may not match up with the headline figures set out in our main report.
For more detailed discussion of the customer list data, please see the Annex at the end of this document.
Google advertiser characteristics
The Google dataset contains data on advertisers on Google Ads that were served in the UK in 2019. It is comprised of [200,000-250,000] unique parent entities (ie advertisers),^1 spending £[6-8 billion] on an estimated [7-10 million] campaigns and [0.5-2 trillion] ad impressions. Search advertisements made up £[6-8 billion] and display advertisements made up £[400-700 million] of the ad revenues in the dataset. Out of the total unique advertisers, around 20- 35% of advertisers used a media agency, and they accounted for around 70- 90% of total spend, 70-90% of campaigns run and 70-90% of all impressions.^2
Figure N.1 shows the breakdown of spend, number of impressions (ie adverts), and number of campaigns by ad product type.
(^1) Based on Google’s submissions, we note that the data was broadly provided at the parent level, which may not always be inferred to represent a unique advertiser. 2 We note that the variable identifying whether the advertiser uses a media agency may not be fully accurate in accordance with Google’s submissions, and some relationships with agencies may not be fully represented.
Figure N.2: Google cumulative spend percentile by advertiser percentile (from smallest to largest)
Source: CMA analysis based on Google data.
Figure N.2 shows that a minority of very large customers account for a large proportion of spend, while the majority of smaller customers spend comparatively little. The top [5-10]% of Google advertisers by ad spend make up more than 85% of Google’s total revenue as reported in the specific data set. This leads to a considerable skew in the distribution of revenue across advertiser customers. To further show the distribution of spend, Figure N. shows the number of advertisers split by how much they spent on Google Ads advertising in 2019.
Figure N.3 Google number of advertisers, split by 2019 Google Ads advertiser spend groups
Source: CMA analysis based on Google data.
This shows that the majority of Google’s advertisers spent between £100 and £5,000 on Google advertising and in particular between £100 and £1,000.
Industry distribution
In Figure N.4 we present the total spend by all advertisers and the number of advertisers within each industry.^3 Based on Google’s submissions, we note that the data provided on industries may not be an accurate representation of the actual industries in which the advertisers operate, and these are not provided by the advertiser directly. Due to the limitations of the data, we have treated these results with caution and have only made broad generalisations about our findings.^4
(^3) In the data as provided by Google, the column for the vertical (which is used as a proxy for industry) often included two or more categories (as an example, one advertiser account might be classified as one vertical while other accounts might be classified differently). For ease of analysis, the data has been re-coded such that these advertisers are counted as being in all industries listed. While this method is useful for analysis, this also means that the sum of spend and the number of advertisers will be greater than the total spend and number of advertisers due to double counting. We note that it is possible that the advertisers who were listed in multiple verticals might spend the majority of their money on one of these verticals, and little on the others, which would not be captured by this graph. As a sensitivity, similar graphs have been created with the advertisers who were present in several industries belonging to a ‘mixed’ category, and the general distribution across both spend and number of advertisers appeared very similar in both cases. The biggest difference in spend was for [], which prior to including those in several industries was [ 4 ] and is now []. Despite the limitations of this data, we note that our findings for spend are broadly consistent with the IAB UK & PwC Digital Adspend Study 2019 findings, which show the distribution of spend of five media agency groups in paid search, split by industry. We note that the main difference in our findings is that the automotive sector is not as prevalent. Where our results differ from IAB’s, this may partially be explained either by a difference in classification of industries, or because our figures also include some display advertising.
other cost types, including for example cost-per-engagement (CPE), fixed cost-per-day (CPD), cost per view (CPV), cost per lead (CPL).
Figure N.5 shows the share within Google of these campaign types by three different weightings according to the data provided, including both search and display.^5 This figure shows the breakdown by spend, number of impressions, and by the number of campaigns.^6
Figure N.5: Share of campaign types (CPC, CPM, CPA, other) by spend, impressions and campaigns
Source: CMA analysis based on Google data.
This shows that in all three cases, more than 85% of advertisers or their agencies (in terms of ad spend, number of impressions and number of campaigns) chose to run campaigns and adverts paid for on the basis of CPC, with a small percentage opting for CPM and other means. The least popular method appears to be CPA (at least relative to CPC and CPM).
Facebook advertiser characteristics
The Facebook dataset contains data on UK-based advertisers who targeted exclusively UK-based users in 2019. It is comprised of [over 1 million] advertisers, who collectively spent £[1-1.5 billion] on [over 9 million] campaigns in 2019.^7 Non-video advertisements make up [over £600 million]
(^5) Search advertising is generally bought on a CPC basis and display advertising is generally bought on a CPM basis. 6 We note that caution should be given when interpreting these results due to the limitations of the dataset provided, as the data came from different sources and information for all campaigns was not matched between the data tables. 7 The total spend in 2019 as obtained from the customer lists is considerably lower than our estimates of Facebook’s revenue in 2019 as reported in Chapter 5. This is likely as the 2019 customer list data only captures spend by UK advertisers who advertise exclusively to UK users.
and video advertisements make up [over £500 million] of the total spend on Facebook display advertising in 2019.
Customer distribution
As with Google, to understand the composition of Facebook’s customers, we look at how cumulative spend changes with each successive advertiser. This is shown in Figure N.6.
Figure N.6: Cumulative spend percentile by advertiser percentile (from smallest to largest) 8
Source: CMA analysis of Facebook data.
Figure N.6 shows that a minority of very large customers account for a very high proportion of spend. In particular, of the UK-based advertisers who targeted exclusively UK-based users in 2019, the top [5-10]% of Facebook’s advertisers by ad spend made up [90-100]% of Facebook’s total revenue. Comparatively, smaller advertisers account for a relatively small proportion of total spend, as with Google. Figure N.7 shows the number of advertisers split by how much the advertisers spent on Facebook advertising in 2019.
(^8) We note that as this data only includes UK-based advertisers who target exclusively UK-based users, it is likely that some UK advertisers will not be captured here. For example, it may be that some large advertisers based in the UK who advertise internationally will not be captured here.
Figure N.8: Total spend and number of advertisers, split by industry^10
Source: CMA analysis of Facebook data.
This shows that there is a wide distribution of industries that spend significant amounts on Facebook advertising, as with Google. Industries that are prominent across both Google and Facebook include retail, entertainment & media, financial services, and consumer packaged goods.
Demand is particularly concentrated in consumer packaged goods, ecommerce and financial services, where a considerable amount of spend comes from a relatively smaller number of advertisers.
Campaign shares
We have also analysed how spend differs between different campaign objective types. Facebook’s advertiser interface asks advertisers to specify a campaign objective out of the broad categories:^11
awareness;
consideration; and
conversion.
(^10) Unknown advertisers represent a minority of revenue but a significant proportion of UK-based advertisers who target exclusively UK-based users in 2019. 11 For a full breakdown of the options presented to the advertiser and what these mean, please see the ‘Display advertising using Facebook Ads Manager’ section.
Each of these objectives represents a campaign focused on customers at a different stage of the campaign funnel shown in Figure N.10. Advertisers often run multiple campaigns and each of these will have its own objective, so the more complex an advertiser’s overall strategy is, the more campaigns will likely need to be run by the advertiser.
Figure N.9 shows the breakdown of spend and the number of campaigns by campaign objective.
Figure N.9: Share of campaign objectives
Source: CMA analysis of Facebook data.
This shows that the most popular campaign objective is consideration, followed by conversion, and awareness is the least popular of the three. We note that many media agencies and advertisers have indicated to us that display advertising is particularly effective for increasing brand awareness.^12 However, it is not clear how this aligns with Facebook’s campaign objectives. It may be that consideration and conversion campaigns are also effective in increasing brand awareness, as even customers who do not interact with an ad will see it, which may help explain why these objectives are frequently chosen.
Choice of advertising
When advertisers decide to purchase advertising, there are several decisions they must make in the process, including considerations of what their key performance indicators (KPIs) should be and what format is best suited to their needs. This section discusses what advertisers and media agencies have told us about how they use KPIs and choose digital advertising, examining the substitutability of different forms of advertising.
(^12) See the ‘Search vs display’ sub-section.
Advertisers and media agencies told us that KPIs will vary across advertisers and from campaign to campaign. One media agency gave us the following categories to which most KPIs will relate:
sales – the successful sale of a product or service to a consumer;
leads – the generation of an enquiry or request from a consumer for further information on a product or service engagement;
awareness – raising the awareness of a particular product or service within the consumer population to increase its likelihood of a sale or lead;
reach – delivering the highest possible amount of unique consumers on a given campaign within the defined campaign level parameters to ensure that the advertising message has hit the highest volume of relevant consumers;
quality traffic – directing real unique consumers to an advertiser’s site or product/service landing page to introduce or start the sale process, or to spend a certain time on the website or visit it a certain number of times;
cost – cost of media, keeping this low and the quality high is a common metric in awareness campaigns; and
SOV – how much share of voice does an advertiser have in the marketplace in comparison to its competitors.
Choosing digital advertising
At a high level, choice of appropriate digital advertising media is largely made on the basis of maximising advertising KPIs. In order to do this, advertisers or their agents need to be able to measure outcomes. This means that, in addition to the performance of media in meeting KPIs efficiently (at low cost), principles of accountability^14 and measurability^15 are also important in driving advertiser choice.
One media agency told us that KPIs may not be consistent across different channels within a single campaign. For example, a campaign may have a video element that is tasked with driving product awareness, and a search element that is designed to track converting customers ready to buy. As such,
(^14) The ability to track and report back on the delivery of marketing investment against delivered media granular targeting – user level targeting that has been augmented with further insights to provide rich profiles of users that can then be targeted within digital campaigns. 15 The ability to report back on the success and effect on a client’s business at broad reach awareness campaigns and down to highly targeted performance media buys looking at online sales.
advertisers may be interested in cross channel integration, which allows them to execute campaigns that will have the right mix of media channels and technologies to meet their overall business objective. This may be achieved with a campaign that has different media channels working towards different individual KPIs. This media agency’s clients are therefore interested in tools and measurements which allow them to see the value each element of their media mix brings to that overall business objective. Value may be monitored through econometrics modelling, or multi-touch attribution modelling. However, due to regulation and the walled garden environments a lot of tech platforms operate within, a fully multi-channel measurement capability is still something that the industry is not able to fully provide.
Another media agency noted that there are several different methods that it employs in order to measure performance against KPIs, including:
Previous campaign performance : Where possible, the media agency uses the client’s own previous campaign performance to establish the effectiveness of a given platform. This provides the media agency with the most accurate and relevant performance benchmarks for that specific client. It does not rely on aggregated industry benchmarking and instead accounts for the specific characteristics of the client’s product, proposition, pricing, customer journey, and brand positioning.
Third party insights : When no previous performance data is available, the media agency will use third party insight tools relevant to the client’s industry, product(s) and audience to establish performance benchmarks. These insight tools include aggregated data tools such as Hitwise (which looks at UK web behaviour based on panel data), Crimson Hexagon, and Google; market research platforms such as Mintel or eMarketer which collate key industry reports on a variety of industry sectors.
Platform benchmarks : The media agency will often speak directly to the platforms to understand what type of performance benchmarks they would expect for a client. This can range from metrics such as expected impressions to number of clicks to a site. This is particularly useful if the client has never run activity on the platform before.
Another media agency noted that in some cases choice is driven by attributes which are exclusively available with a certain advertising channel, as they help clients select the best platforms for their campaigns based across three pillars of exclusive inventory, exclusive data or exclusive technology/capabilities. Advertisers can also be motivated by numerous idiosyncratic factors in their choice of platforms. These can include for example: commercial agreements; restrictions due to the nature of their
agencies that collectively represent a large proportion of customer demand for Google and Facebook. In addition, we commissioned qualitative research to explore the experiences of 24 mostly smaller advertisers using Google and Facebook. For further discussion of the advertisers and media agencies contacted and the qualitative research, please see the Annex.
Multi-homing
We have collected views from both large and small advertisers on the extent to which advertisers use platforms other than Google and/or Facebook (ie advertisers who are multi-homing). As large and small advertisers differ in terms of their preferences and behaviour, we first look at views expressed by large advertisers and media agencies, and then smaller advertisers.
All of the large advertisers that responded to our questionnaire used multiple platforms to buy digital advertising. Most of these advertisers use media agencies and are generally quite knowledgeable about digital advertising and may be more sophisticated in its usage.
The media agencies and large advertisers we contacted told us that the benefits to using multiple advertising platforms was that this provided advertisers with greater variety in several dimensions, allowing them to better achieve their KPIs. Using multiple platforms may allow advertisers to improve audience reach, access audiences in a variety of mindsets,^16 use multiple formats and have more flexibility in optimising targeting capability and cost effectiveness. One media agency noted that the cost of only using one platform would usually relate to missing out on inventory or data that are exclusive to certain platforms (for example YouTube inventory in DV360 or Amazon data in Amazon DSP). Some advertisers mentioned that a multi- platform approach also avoided them being overly reliant on a single platform as this could create inefficient dependencies.
Media agencies and advertisers told us that it is not possible fully to compare and contrast media input metrics consistently from digital platform to digital platform. Different platforms can have different approaches to measurement and custom metrics that require manual effort to combine reports and assess impact. There are often issues moving data in and out of platforms due to concerns from large scale players around value of owned data, as well as the need to consider applicable privacy laws (eg if moving data from a platform involves an international transfer of that data). Cross-channel attribution is a challenge because platforms guard their data for both monetary and data
(^16) For example, an audience actively searching for a solution (eg on Google, Bing or Amazon), has a different mindset to an audience consuming content on a news site.
protection purposes. Cookie based attribution neither allows for de-duping device impressions nor accurately represents the conversion path, and further also requires user consent.
However, most respondents suggested that while there were issues of comparability across platforms, these were not sufficient to stop them using multiple platforms. One media agency noted that these issues are also true of offline advertising channels and that the role of any agency is to understand the differences between the platforms and the relative merits of each.
Smaller advertisers may be more likely to only use Google or Facebook rather than smaller platforms, as Google and Facebook have sufficient scale and reach for the advertisers’ needs and offer greater convenience due to the ease of their interface than using multiple platforms.
Of the 24 advertisers contacted during the qualitative research that we commissioned, most were smaller advertisers. Roughly half of the respondents were single-homing (ie using only one platform). Amongst multi- homers, most were multi-homing solely using Facebook and Google. Only a minority were multi-homing using other providers in addition to Facebook and/or Google. Of those advertisers who were multi-homing, the majority spent much more on one provider than any others, indicating that they behaved similarly to those advertisers using only one platform.
Of the advertisers who were only using one platform (ie Google or Facebook), these were primarily the smallest advertisers, namely micro or small SMEs who are less sophisticated and less tech savvy, who either spend less on advertising or who have a simpler product mix. The decision to use only one platform was rarely reached after a detailed review of all possible approaches and providers available. In fact, the decision was often driven more by a lack of knowledge or time to engage with other opportunities and could be more of a default non-choice than an active decision. Some respondents had simply not even considered any other providers as they were happy with the results they currently got and had not contemplated the need to do more. However, some advertisers had given this more thought, and there were a number of key reasons specified for why these advertisers were only using one platform.
Some respondents stated that they had no perceived need to advertise elsewhere, as their advertising was performing at a level that it was unnecessary to advertise elsewhere. However, some advertisers acknowledged that this may have been driven by a lack of knowledge of effective alternatives, or due to their product mix not being conductive to other forms of advertising. Some respondents stated that they viewed their current situation of using only one platform as ‘good enough’, with acceptable ROI
of advertisers using Google also use Bing and/or Yahoo!.^17 When the analysis showed instances of users conducting searches on Bing and subsequently clicking on an ad that redirects to a landing page on the relevant website, it can be inferred that that advertiser is advertising on Bing.^18 The results of this analysis showed that in the UK, advertisers accounting for [60-70]% of the paid clicks on Google also advertised on Bing/Yahoo!, indicating a significant amount of multi-homing for search advertising in 2011.^19 While this study is somewhat outdated, the findings seem to broadly correspond with the views expressed by media agencies and advertisers for search,^20 though this may not read across to display advertising.
Online vs offline
At a high level, digital advertising is differentiated from offline ‘traditional’ media due to the ability of advertisers to use data to target specific audiences online. For example, search advertising can be used to target audiences who have expressed intent through search queries, and display advertising can use gathered data to target specific audiences.
Of the advertisers contacted in the qualitative research, all respondents (including both smaller and larger advertisers) saw online digital advertising as more important than offline advertising and many did not use any offline at all due to this. When deciding how and where to advertise, respondents tended first to think about whether to advertise digitally or offline, and it was rarely a binary choice about whether to advertise on Google or Facebook, but instead whether to advertise online or offline. This may indicate there is limited substitutability for advertisers between online and offline. Of the advertisers who did use offline advertising, most were spending the vast majority of their budget on online advertising, with both Google and Facebook seen as having very similar benefits when compared to offline advertising.
The main reasons given for preferring online advertising included:
greater effectiveness in driving traffic and sales to the advertiser’s website in part due to the ability to target specific audiences which is not as feasible to do with offline advertising;
perceived better value for money;
(^17) []. (^18) []. (^19) Google submitted that this is a conservative estimate, as this methodology is unlikely to capture all advertisers on Bing/Yahoo!. [ 20 ]. As this research looks at revenues, these findings may be driven by a minority of very large advertisers who were multi-homing.
easier to judge ROI;
easier to ‘do it yourself’ compared to traditional advertising, requires minimal investment and knowledge, easy to get started;
faster to implement and more flexible than offline advertising; and
perception that it is what everyone else is doing.
Some of these reasons indicate that there is limited substitutability between online and offline, and that advertisers may consider that there are greater barriers to entry to offline sources due to them requiring greater investment or knowledge. However, we note that the advertisers contacted during the qualitative research all advertised online on either Google or Facebook at least to some extent, and these views may not reflect the views of all advertisers.
One SME advertiser^21 in the golf industry said that digital advertising is considerably more effective than offline traditional media. They use Facebook to reach interested golfers by using the keyword search and target users within an 80-mile radius, with £100 getting them around 35,000 interested golfers. They say this is a more effective strategy than buying quarter of a page in a national golf magazine, which will cost considerably more and will not be viewed by as many people. In this case, online advertising has a better ROI for the advertiser.
Some large advertisers thought that video-on-demand is the next best alternative to Facebook for display. For example, one advertiser pointed out that they consider ITV, Channel4 and Sky as alternatives to Facebook when deciding where to advertise, and that the advantages of advertising on TV were the high-quality inventory, high viewability, big size of screen and audio on and brand safety. Another advertiser noted that 4OD has good content and high video completion rates and they rank 4OD and Sky higher than Facebook for achieving relevant KPIs in video advertising. Advertisers may then treat offline advertising as a complimentary channel within their campaign to achieve certain KPIs.
Those who consider video-on-demand a viable route mentioned that this method does not allow for viewability and audience measurement and some do not offer the option of buying inventory programmatically. Moreover, one advertiser mentioned that video-on-demand is more expensive than TV and it has some brand safety and appropriate content concerns. Hence, this
(^21) The advertiser had between 10 and 49 employees.
