Science fiction author Stephen R. Donaldson said that “Everything dies, from the smallest blade of grass to the largest galaxy.” A few years ago I could have told you that this is true – about everything except Google and Meta’s advertising business. Wow, how times change.
Google and Meta control less than 50% of digital ad spend for the first time since 2014, a trend that is set to accelerate in coming years, according to axles🇧🇷 Citing predictions from Insider Intelligence, Axios reports that Google and Meta are expected to bring in 48.4% of online ad revenue this year – 28.8% for Google, 19.6% for Facebook parent – a number that has steadily dropped since the peak of the tech giants in 2017, when they received 54.7% (Google at 34.7%, Meta at 20.0%).
“Google and Meta face a number of challenges for their advertising businesses, including a more privacy-centric market, economic turmoil, a reset in expectations following the pandemic-induced spending boom, and general uncertainty in the technology and media sectors,” he said. Paul Verna, principal analyst at Insider Intelligence.
For a long time, fans of market competition worried (rightly) about Google and Meta’s duopoly over digital advertising, the business that powers the entire internet. The two advertising giants aren’t going away anytime soon, but make no mistake, we’re entering a new era in the online world.
“These are sober days for these companies, but in addition to losing some share to companies like Amazon and TikTok, although we currently don’t see an existential threat to any of them,” Verna said.
Meta did not respond to a request for comment. Google declined to comment on its financials.
There are many reasons for the change, but my two favorites start with the letter “A”. Maybe you’ve heard of them: Amazon and Apple. When you hear these names, “ads” probably isn’t the first word that comes to mind – unless you’re in marketing.
Amazon and Apple are probably the most significant disruptors in the corporate ad industry over the last ten years. Thanks to your efforts, digital advertising is undergoing a sea change.
The Apple effect is very interesting. Last year, your iPhone started asking if you wanted to let your apps track it. It probably didn’t seem like much to most people, but it made a young entrepreneur named Mark Zuckerberg very, very upset. That setting, called App Tracking Transparency, cut off the flow of user data from the iPhone to Facebook and Instagram. This is what you might call “problem🇧🇷 Tracking you on other companies’ apps and websites is a critical part of Meta’s advertising infrastructure. Ultimately, Meta said it lost $10 billion dollars because of that scenery alone🇧🇷
One of the great things that App Tracking Transparency has done is open the door to competition. Meta’s ad business was destabilized, and suddenly third-party data was much harder to obtain. This has caused large consumer-facing companies with tons of data about their own customers to start thinking about launching their own advertising businesses. Quite of them, especially retailers such as 7-11, Best Buy, Chewy, CVS, DollarTree, Doordash, eBay, Home Depot, Instacart, Kroger, Lowe’s, Macy’s, Target, Walgreens, Walmart, Wayfair, Ulta – not to mention other competitors of technology like TikTok. Until Marriott got in the game🇧🇷
To quote ad industry analyst Eric Seufert, currently, “everything is an ad network🇧🇷
But one company was hard at work on the advertising project even before Apple’s revolutionary privacy setup. Amazon’s advertising business is exploding. Today, Amazon makes more than $30 billion a year from ads, which is actually more money than Amazon makes on Prime and all of its other subscription services combined.
“All of these trends represent seismic shifts for Google and Meta – two companies that, until recently, exceeded Wall Street’s high expectations and, in some cases, its own guidance,” said Verna.
Get used to it. Insider predicts that Amazon will capture 12.7% of US digital advertising dollars by 2024, compared to the 17.9% forecast for Meta.
Seufert writes on his blog mobile development memorywhat Google and Meta are likely to keep the top two spots on the list of digital ad revenue generators for the foreseeable future. But the duopoly era of its uncontested online dominance has come to an end:
Given the astonishing growth of Amazon, TikTok and various retail media networks – including those launched this year such as Netflix – it is reasonable to characterize the digital advertising market in 2022 as materially more competitive than in 2016 or 2017. Duopoly Representation is tenuous with Google and Meta seeing a combined minority stake.
48.4% of the nearly $250 billion digital ad business is not exactly change. But in 2023 and beyond, the internet and technology landscape is going to look very different from the flow of ad dollars to other companies.
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