According to the 2022 edition of ‘Advertising Expenditure in Japan’, an annual press release by major advertising agency Dentsu estimating total advertising expenditure and advertising expenditure by medium and industry, total advertising expenditure in Japan in 2022 was 104.4% of the previous year's total, at JPY 7,102.1 billion, the largest ever since 2007, when it topped JPY 7 trillion for the first time.
And in 2023, internet advertising media spend is forecast to continue to grow steadily and expand by 112.5% year-on-year to ¥2,790.8 billion, while advertising strategies will further change dramatically with the advent of Web 3.0.
The lack of a ‘payment’ function meant that Internet users could not receive direct payment for information published online. Therefore, only players such as publishers, advertisers and retailers attempted to monetise in various ways.
Blogs, SNS, social bookmarking and RSS emerged. The goal was to open up information and monetise it through an advertising model, but the emergence of major platforms resulted in the ‘era of closed platforms’.
In the Web 2.0 era, hobbies, tastes, interests and principles are linked around a single user as a common denominator, and this relationship is directly linked to advertising, product sales, marketing, etc. The ‘interest graph’, which claims that the correlation between people on SNS such as Twitter and Facebook is linked to marketing, etc. The so-called basic concept of marketing in the Web 2.0 era is the ‘social graph’, which states that the correlation between people on social networking services such as Twitter and Facebook is linked to marketing and other activities, and that the aim is to create a hybrid of the interest graph and social graph.
Advertising in the Web 2.0 era was divided into four areas: ‘long tail type’, ‘aggregate type’, ‘listing type’ and ‘CGM type’.
The long-tail type is one in which advertisements are distributed to individual websites and blogs to consolidate traffic and reduce advertising costs, and includes content-linked advertising as typified by affiliate and Adsense.
Aggregate location type is where advertisements with high word-of-mouth value for advertisers are shared on social networking sites and blogs, and a fee is charged for the placement of the advertisements.
Listing type is a generic term for search-linked advertising, which appears in conjunction with keyword searches on search engines such as Yahoo! and Google, and display advertising, which can be placed outside the search results screen.
CGM stands for Consumer Generated Media, which is a generic term for media in which content is generated mainly through posts by general users on word-of-mouth sites, SNS, blogs and bulletin boards (BBS).
It is said that these advertising methods of the Web 2.0 era will no longer work in the Web 3.0 era.
In the Web 2.0 era, companies such as Google, Apple, Facebook and Amazon held various data on consumers and used it for marketing activities.
Advertisers also implemented their advertising strategies via these companies, which ultimately played the role of a platform, so it is not as if they benefited 100% from advertising in terms of cost-effectiveness. Naturally, this is because advertisers also paid advertising fees to the companies that played the role of platform.
However, once the decentralised internet based on blockchain becomes widespread, the ownership of data will shift to individuals, and the marketing methods of the past will no longer work.
As the concept of marketing changes, advertising strategies will naturally change as well. For example, the role of advertising agencies is likely to change in a Web 3.0 world. As mentioned earlier, the ownership of data will become personal, which means that advertisers will also become personal.
At the moment, we are in what can be called the dawn of Web 3.0, so this is only an observation balloon speculation. The term ‘Web 3.0’ appears on the Internet like a trendy word and is often spoken of in a positive light, but naturally, in a new concept and a period of change, troubles accompanying system changes are bound to occur.
Experts have voiced concerns that the Web 3.0 era will see malicious individuals gaining more power, black hackers becoming more active, and data leaks becoming harder to stop.
However, these concerns are only some of the predictions. It cannot be said that they will happen or that they will not happen. When the real Web 3.0 era arrives, there may be benefits and troubles that were not anticipated.
If the advertising methods of the Web 2.0 era will no longer work in the Web 3.0 era, what will be the marketing concepts and advertising strategies?
According to experts, the basic concept of marketing in the Web 3.0 era will be the ‘token graph’, in which each user's NFT tokens are analysed to identify their interests and preferences, which can then be linked to marketing and other activities. Let us explain what a ‘talking graph’ is.
In the Web 3.0 era, it is said that token graphs will become a basic marketing concept, whereby each user's NFT tokens can be analysed to identify their interests and preferences, which can then be linked to marketing and other activities.
So far, we have explained that once the decentralised internet based on the blockchain spreads, the ownership of data will shift to individuals, so the marketing methods of the Web 2.0 era will no longer apply, and that the key to solving this problem is the ‘token graph’.
Token graphs refer to tokens (a generic term for NFTs and cryptographic assets) held by users based on public information on the blockchain, allowing the interests and preferences of the holders to be inferred, enabling the distribution of NFTs with high affinity and the promotion of corporate products and services to strengthen marketing.
Mr Daisuke Tokunaga, President of SUSHI TOP MARKETING Co Ltd, which has strengths in NFT distribution technology, advocates this type of ‘talking graph’ as a Web 3.0 marketing method.
He further points out that ‘the key in the Web 3.0 era is to distribute NFT in the form of free novelties first, and then conduct marketing through continuous communication with the user’.
The ‘token graph marketing’ he advocates is based on the premise that ‘token graphs do not replace the interest graphs and social graphs of Web 2.0, but are a new marketing concept that is “added” to them’. The term ‘NFT’ refers to ‘a marketing method of sending NFTs to people based on their attributes and tastes based on the information in their token graph, the “token graph”.
For example, if a wallet contains several NFTs related to VR, it can be predicted that the user has a VR head-mounted display at home. Companies that develop VR-related services can select such wallets and send NFTs as advertisements.
This is ‘token graph marketing’.
So what exactly is the difference between the Web 2.0 interest graph and social graph and the Web 3.0 token graph?
Social graphs infer personal attributes from the use of social networking services, etc., and interest graphs infer interests and preferences from search history on browsers, etc. Both types of marketing are tied to company-owned digital data that plays the role of a platform, and until now, marketing has been conducted unilaterally from the company's side.
In contrast, Talking Graph is marketing tied to digital data owned by individuals, and is marketing that respects the intentions of users more than in the past, in that they can independently choose the NFTs they own.
In other words, the main difference is that marketing is conducted from the angle of ‘what digital data an individual owns’, rather than the conventional ‘who has what interests’.
This is the main overview of token graff or token graff marketing. So what are the benefits of this token graph marketing for advertisers and users?
First, through token graf marketing, advertisers are assured of the ‘certainty of the data provided’. This is due to the ‘irreplaceable, one-of-a-kind’ and ‘difficult to copy or alter’ nature of NFT, as well as the fact that they ‘own the NFT data’. This allows targeting and analysis with certainty.
On the other hand, on the user side, ‘privacy protection’ is ensured. This is because it is the ‘target NFT owner’ that is targeted, not the individual themselves.
Based on the above, when looking at the advertising industry, it will probably become more difficult to target by age and gender, as the advertising industry will also select and analyse targets using a talking rough of ‘what kind of NFTs they own’.
The same hurdles are also expected to be faced in targeting users who are ‘thinking about buying’ or ‘interested at the moment’, as in search advertising.
If metaverse and NFT penetration grows rapidly, will these two new technologies solve the advertising industry's three clear old challenges (cumbersome procedures, inability of individuals to easily buy ad space and lack of global reach)?
The Metaverse has attracted global attention since Facebook changed its name to Meta at the end of 2021. Companies from a wide range of industries, both domestic and international, have already announced their entry into the market one after another, and the use of the metaverse is expected to progress in a wide range of industries and domains.
Among these, one area that is expected to have a particularly large impact is the use of the metaverse in the advertising and marketing domain. On the other hand, the use of the metaverse and other virtual spaces is at the heart of the topic of NFT.
So how will NFT and the metaverse change the advertising industry?
Firstly, the reason why attention is focused on the use of metaverse in the advertising industry is that, although the use of metaverse is currently expanding, mainly for VR games, it is thought that various activities such as social networking, commerce and various events will shift onto the metaverse.
It is said that the advertising business has developed around the areas where people's gaze is focused in each era, and the metaverse is envisaged as the next area after TV → Internet (websites, SNS).
A major difference between advertising and marketing activities on the web and SNS and those in the metaverse is that brands can design experiences with interactions in a three-dimensional space for users.
The metaverse also makes it possible for brands to have users experience their brand's world view through events that were previously held in real life and through gamification experiences, which are difficult to achieve in real life.
Furthermore, the use of user data is an element that determines the cost-effectiveness of advertising. The market for internet advertising continues to expand rapidly as a result of significant progress in the use of user data, while the market for TV and newspaper advertising continues to shrink.
If the metaverse permeates people's lives, it is conceivable that more user data could be acquired compared to web/social network advertising, and by utilising this data, it may be possible to provide advertising with a higher ROI compared to conventional web/social network advertising.
NFT is expected to be a means of resolving the old clear issues (cumbersome procedures, inability of individuals to easily buy advertising space, lack of globalisation) as well as the expectations of such metaverse in the advertising industry. The introduction of NFT into the buying and selling of advertising rights simplifies transactions and improves transparency and speed.
The introduction of NFT will simplify transactions and reduce costs by eliminating the need for an advertising agency, as the conventional process of media and advertisers working through an advertising agency will become a P2P exchange.
In addition, if rights-incorporated NFTs are sold in the marketplace, individuals can purchase them as long as they have a wallet. Furthermore, with the introduction of NFTs, Japanese advertising space can be bought even from abroad.
Thus, if the penetration of metaverse and NFTs continues to expand rapidly, long-standing issues in the advertising industry will be resolved, and there is the potential for structural changes in the advertising industry, including the raison d'etre of advertising agencies.
The advertising industry is entering the Web 3.0 era and new technologies are expected. Internet advertising is forecast to expand by 112.5% year-on-year to 2,790.8 billion yen. In this transitional period, which has the potential to bring about structural changes in the advertising industry, we introduce six trends to watch.
▶ According to the 2022 edition of ‘Advertising Expenditure in Japan’, an annual press release by major advertising agency Dentsu, which estimates total advertising expenditure and advertising expenditure by medium and industry, internet advertising expenditure will continue to maintain a high growth rate against the backdrop of the digitalisation of society, reaching 3.912 trillion yen, 114.3% of total advertising expenditure in Japan. It states that this represents 43.5% of total advertising expenditure in Japan.
The report also forecasts that internet advertising media expenditure will continue to grow steadily in 2023, expanding to ¥2,790.8 billion, 112.5% of the previous year's figure.
▶ According to the 2022 edition of Dentsu's ‘Advertising Expenditure in Japan’, video (video) advertising expenditure in 2021 will be JPY 512.8 billion, a 132.8% increase from 2020. This growth trend is expected to strengthen in the future, with the video advertising market forecast to exceed JPY 600 billion.
One of the main reasons for the strong performance of video advertising are video-sharing SNSs such as YouTube and TikTok, and the penetration of video-sharing SNSs has been attributed to the increase in ‘home time’ in the Corona disaster.
▶Of the fast-growing video advertising market, in-stream advertising (video ads that appear in the middle of video content) is expected to grow particularly in the future. Short film posting platforms such as TikTok, YouTube shorts and Instagram reels are influencing in-stream advertising, which is expected to become even more popular in Japan by 2023, while expanding its age range.
▶ Social advertising expenditure in 2021 was JPY 764 billion (134.3% of the previous year), a significant increase from 2020, and now accounts for 35.4% of internet advertising media expenditure. Social advertising is increasing its presence year by year, and is expected to show stable growth and increasingly high demand in the years to come, following the aforementioned strong performance of in-stream advertising on YouTube and TikTok.
▶Among internet ad spend, which continues to show stable growth, digital ad spend originating from the four media of the mass media recorded high growth of 132.1% (106.1 billion yen) compared to the previous year.
Among these, TV-media digital has grown by a high 146.8% year-on-year. A major factor behind the strong performance of TV Media Digital was the penetration of video streaming services in the wake of the nest egg demand, but TVer, which was launched in 2015, also played a major role.
▶In response to the growing momentum for the protection of personal data, laws and regulations on the handling of personal data are becoming stricter in various countries and regions: the GDPR (EU General Data Protection Regulation) came into force in May 2018 and the CCPA (California Consumer Privacy Act) began to apply in January 2020. In Japan, the revised Personal Data Protection Act came into force in April 2022.
With the EU General Data Protection Regulation (EU General Data Protection Regulation) having come into force in parts of Europe and the US, which declares cookies to be personal data and prohibits the provision of cookies to third parties, and Google and Apple following the trend and banning 3rd party cookies, companies utilising internet advertising are under pressure to make a decision to change their advertising methods. companies using internet advertising are being forced to make a decision to change their advertising methods.
It is said that the accuracy of internet advertising will ‘fall off’ after 2023. This is due to Google's announcement that it will discontinue third-party provision of cookies in 2023.
Cookies are information automatically embedded in web browsers such as Safari and Chrome, which are used to browse the internet on smartphones and PCs, and allow operations such as searching, browsing and purchasing on a website to be linked to an individual (browser ID) without the user's knowledge. The information is automatically embedded in web browsers such as Safari and Chrome, and is distributed among advertising-related companies without the user's knowledge.
Many users have seen messages such as ‘If you continue browsing, you agree to the use of cookies’. Many users will have ‘agreed’ without knowing why.
Consenting to the use of cookies gives advertisers access to data that tracks specific people and their behavioural history, for example, ‘a 20-year-old woman who put a watch in her shopping basket on an online retailer’.
However, with laws (EU General Data Protection Regulation) in parts of Europe and the US declaring cookies to be personal data and prohibiting them from being passed on to third parties, the move to regulate cookies is now about to spread to the whole world.
Google's aforementioned press release on cookies is in response to this global trend; Apple has already discontinued 3rd party cookie support in Safari in March 2020.
Many companies that place advertisements utilise 3rd party cookies to obtain data on internet behaviour history through internet advertising companies, etc. If the use of 3rd party cookies is banned, it is highly likely that it will no longer be possible to identify users as easily as it has been in the past. That means a reduction in the accuracy of online advertising.
On the other hand, SNS advertising does not rely on 3rd party cookies and is based on account users, so if the use of 3rd party cookies is banned, the impact will be minimal. In fact, if the accuracy of online advertising is reduced, the cost of SNS advertising may even rise, as companies that used to advertise online may switch to SNS advertising.
Companies using internet advertising will have to make a decision to move to advertising methods such as contextual matching, which does not use 3rd party cookies.
The latest trends to keep in mind in social network marketing
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