Google and Facebook are Running a Duopoly in the Digital Ad Industry
The digital ad industry is booming. According to IPG Mediabrands’ Magna, digital advertising sales overtook television advertising sales in the U.S. for the first time in 2016. Digital ads accounted for $70 billion in ad revenue, while television ads only accounted for $67 billion. Industry leaders are also forecasting that digital ad revenue will overtake television ad revenue globally by the close of this year, cementing digital ads as the future of advertising. The digital ad industry’s rapid growth may seem favorable for everyone in the industry, but the statistics behind this growth tell a different story. Ad agencies, ad buyers, publishers, and brands are fearing the advent of a digital ad duopoly run by Google and Facebook.
Last year, Google and Facebook combined for a stunning 99% share of the growth in the ad industry. The IAB reported that Google accounted for a 54% share with $1.6 billion in growth and Facebook accounted for a 45% share with $1.3 billion in growth. Everyone else in the digital advertising industry combined for a measly 1% share with $40 million in growth.
The fact of the matter is that the other guys just can’t compete with these tech giants. Advertisers are throwing their ad dollars at Google and Facebook, and smaller competitors can’t do much to convince them not to. Google is the world’s leading search engine, and Facebook is the world’s most used social network. With Google’s roughly 90% share in the search engine market and Facebook’s over 1.86 billion monthly users, it’s impossible for these smaller competitors to provide advertisers with the reach that Google and Facebook offers. Google and Facebook’s smaller competitors also can’t match the wealth of information that Google and Facebook can provide advertisers with about their users. Google and Facebook can provide advertisers with detailed contextual, demographic, geographic, and psychographic data about their users to optimize ad campaigns.
Google and Facebook’s absolute command in the digital ad industry means that they can set their own rules and prices for advertising, and everyone else has to accept them. This is a frightening proposition for Google and Facebook’s competitors, who must fight for survival as these two tech giants continue to experience enormous growth in digital ad revenue.
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