Google, Microsoft, and Yahoo have long been battling for the lion’s share of the $250 billion global digital advertising market. In the last 5 years, social upstarts like Facebook and Twitter have begun to take increasingly large bites of the revenue pie by offering advertisers the opportunity to target known preferences of consumers in the form of ‘likes’ and ‘follows’. Caught on the hop, the old guard’s initial response was to jump on the social bandwagon, but this strategy had very limited success.
However, in the last year or so – led by Google – the ultimate fight for supremacy among the internet juggernauts has not continued over social platforms. Rather belatedly in my view, the battleground has shifted to that staple of online communication: the email inbox.
With access to millions of email inboxes across the globe, internet companies like Google and Microsoft have long been ahead of the game. If they choose to do so, they can measure opens and click-through rates, and they have visibility of every online order confirmation. The latter offers a view of who users have bought from and how much they’ve spent.
This is precisely how the likes of Microsoft, Yahoo and Google know that a branding or promotional message delivered into an inbox is much more powerful than a standard banner ad. For this reason, in July 2013 Google decided to substitute display ads at the top of its Gmail inbox for ‘email-style’ ads with a subject line and a ‘sender’. With these email-style ads, Google is leveraging the effectiveness of email and creating a new and profitable revenue stream. A revenue stream that the social networks cannot – for now – tap into.
More importantly, Google reduced the visibility of alerts and other emails from social networks by side-lining them into a separate tab within the Gmail inbox. By segregating these messages, primarily used to drive users back to their sites, Google (whether intentionally or not) is reducing their effectiveness at the same time as bolstering its own revenue stream with paid-for ads.
Email is already a powerful tool for marketers, which generates a welcome return on investment. If the new Gmail ad format and layout prove as effective, brands are likely to dedicate more of the marketing budget to that space.
What moves will social networks like Facebook make next in this scenario?
Well, in an attempt to tap into the reams of consumer data available through the email inbox, Facebook-owned Instagram is allegedly poised to start offering users @instagram.com email addresses. Facebook tried this tactic itself in 2010 – and it was a total flop. Nevertheless, the move by Instagram indicates how social networks might square up to Google’s recent changes to Gmail.
Yahoo has also begun to serve email-style ads and one in particular jumped out at me this week. Who has paid Yahoo to advertise in the inbox? None other than Facebook, in a clear demonstration of how the social network is trying to leverage the reach and trust associated with email.
In the race to monetise their vast consumer databases and reams of behavioural data, it remains to be seen which online brand will eventually come out on top. Where some advertisers regard email as an old medium in the online space, the fact that Google vs. Facebook has hit the inbox shows that this is far from the case.
Facebook might have once thought that it has much more consumer data at its disposal in the form of its enormous database of brand ‘likes’ – but is a ‘like’ as valuable as a purchase confirmation in an email inbox? Only time will tell if Facebook can really match Google’s data capital, with or without email, and who will win in the online advertising stakes.
Dela Quist is founder and CEO at Alchemy Worx