Facebook and Google enjoy ad duopoly as competitors struggle to survive
The 2017 Q2 results of Alphabet and Facebook stand at $26.01 billion and $9.32 billion respectively, while other players such as Snapchat and Twitter struggle to cut losses and keep up their revenues. In Q2, Twitter reported a drop of 8% in its revenue, as compared to its revenue in the same quarter the last year. The situation is further being aggravated by the fact that these companies are experiencing stagnation, and more and more advertisers are turning to the Big Two for targeted marketing. There is no doubt about the fact the online advertising market is effectively dominated by the duopoly of Google and Facebook.
According to eMarketer, Google and Facebook combined will take home more than 60% of the digital ad investment in US in 2017. In fact, no other player in the US has more than a 5% share in the digital Ad market. Verizon is being perceived as a distant third after the Big Two as it merges AOL and Yahoo under a new subsidiary, Oath. Independent advertising technology companies such as The Rubicon Project (RUBI.N) and Rocket Fuel (FUEL.O) are also struggling with depleting revenues. Both The Rubicon Project and Rocket Fuel reported sharp drops of 39% and 22% respectively in their Q2 revenues this year. Such figures not only reveal the existing wretched of other publishers, but also spell a bleak future for them if the trend continues.
The growth in AdTech industry might reach a point of saturation soon as the duopoly’s dominance makes it difficult for other players to survive.
“Digital advertising will soon be approaching a point of saturation, indicating that there are limits to growth which may not be fully accounted for by the investment community” — Brian Wieser, senior analyst at Pivotal Research.
The thin streak of hope that the AdTech community outside Google and Facebook has is that the duopolistic practices of the Silicon Valley behemoths is not going unnoticed. Google was recently slapped with a $2.72 billion antitrust fine by the European Union for unfairly favoring some of its own services over those of its competitors. Facebook was recently fined $1.4 million by Spain for a series of violations in its data harvesting activities.
The duopolisation of the AdTech ecosystem characterised by the trend of all growth going to just Facebook and Google, by principle, is detrimental for the holistic development of the industry. This duopolisation is not only hurting the publishers, but in the longer run, it might also prove to be negative for the advertisers, when they will have no choice at all but to depend on Facebook and Google for advertising. The need of the hour is a solution which brings together all small and medium publishers against the duopoly. The focus of this solution should be on distributing control among all entities, rather than centralising it with one or a few entities.
Zohem is working on such a data exchange protocol which will incorporate blockchain to unify the the AdTech community outside Google and Facebook and give them control over their individual operations as well as those of the system as a whole. This might just be the beginning of a decentralised AdTech ecosystem.
