Advertising To Antitrust — How Three Tech Giants Are Hurting Small Business

Over 68% of all digital ad spending within the US flow through three companies, Facebook, Google, and (now) Amazon. Unlike their television and print based counterparts these three businesses control the management, statistical analysis, and the channel through which businesses reaches their audience.

At first glance this looks to be a streamlined and democratized form of advertisement. Small businesses have been largely locked out of TV based advertising for years due to the high associated costs, while print media (also costly) has led to diminished returns over the last decade.

While the big three advertising platforms argue they provide a relatively cheap alternative — it’s the lack of choice when selecting and working with an advertising platform that crosses the line into monopolistic behavior.

While in the past businesses have had the option to forgo advertising entirely, it has become increasingly difficult to maintain profitability, let alone grow without a degree of marketing. At the same time web based businesses and sales are growing much faster and than their brick and mortar counterparts. This is making online advertising — a key point of contact for reaching consumers integral to the life of a business.

The lack of choice with respect to advertising platforms is a problem for businesses marketing to US consumers. There are usually only two channels, Facebook and Google for businesses to reach their target audience through (three if the business sells on Amazon). Even businesses like Yelp which receives a huge portion of their revenue through advertisements needs Google for their advertising.

This results in more money being put into online marketing channels, everything from concept development, statistical analysis, message testing, and more needs to be done for a small businesses campaign to now be successful. This combined with the cost of advertising on these platforms raises the operating costs for small and large businesses alike. As operating costs go up, so does the cost of goods and services to consumers resulting in a direct price increase on consumers due to the lack of marketing channel choice for businesses.

There are many factors that go into antitrust and one of the major considerations is whether continued consolidation or walled-off infrastructure raises the costs to consumers. We see this happening right now with the Sprint / T-Mobile merger. The DOJ is hesitant to allow a merger to continue without legal challenge if the proposed combined entities don’t sell off vast parts of their infrastructure to other businesses that can potentially use it to create a new fourth major phone / wireless provider in the US.

Everyday more online only businesses are created. At the same time brick and mortar businesses continue to develop their online presence. Our web based infrastructure will continue to grow and eventually surpass brick and mortar. At that point we will be left with the majority of businesses having no choice but to choose one of three businesses to advertise through.

As with most problems this is better solved early. Breaking up the tech giants is one of many possible solutions to this problem. Opening up their infrastructure and classifying their platforms as quasi utilities can potentially be a longer term solution. This would allow them to continue to grow, maintain their platforms, and receive revenue from startups and small businesses that choose to use their platforms as the backbone of their own advertising networks. While this problem needs to be addressed nothing can be done until people and businesses are ready to address the issue.

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