We continue our list of 10 digital trends we see impacting our clients’ business during the coming year.
If you haven’t read the first post in the series we recommend you start here: Countdown 10 Digital Trends to Watch in 2017 – #10
5) Facebook & Google: The Growing Duopoly
There is no denying that Facebook and Google are the largest platforms within the digital ecosystem as we know it, and they are only getting bigger. In 2015, total display ad revenues (across the largest entities) reached $27 billion in revenue, up 22% from the year prior. When analyzing that overall growth, Facebook and Google accounted for 25% and 13% respectively; the next highest was Twitter with 5% of the growth. Per eMarketer, these respective revenue trends are expected to continue once the books are closed on 2016, and on into 2017. The reason for this growth is primarily due to mobile, where both Google and Facebook have excelled, and is the fastest growing sector within digital. When including search, Google and Facebook take over 55% of all U.S. dollars spent on digital advertising. So it is no surprise that competitors are aggressively looking to cut into these ad dollars which have been commandeered by this duopoly. In 2015, Verizon completed a $4.4 billion-dollar acquisition of the long-standing internet pioneer AOL. Ideally this acquisition will place Verizon in a position to gain market share and start to compete with Google and Facebook. We expect to this type of consolidation to increase as the scale needed to compete will only grow.
An argument can be made that Google and Facebook offer advertisers the most efficient and effective way to reach their customers. On the other hand, advertisers are rightly worried about their growing concentration of power in the marketplace. These two entities can arbitrarily adjust pricing of their inventory, squeeze competition and make unilateral decisions that will affect the entire marketplace. Additionally, both are closed platforms, also known as “walled gardens,” and allow for less transparency for advertisers.
Based on the current hold Facebook and Google have on the digital ad industry, advertisers need to find a workable means to leverage the scale and power of these platforms, while balancing the need for oversight and collection of their own campaign data. One way to do this is by using independent third party buying platforms that can effectively manage and optimize campaigns to maximize ROI. In addition, marketers should consider spreading advertising budgets between heavy hitters like Facebook and Google as well as other vendors and platforms to provide a balanced approach to reach their target audience.