• by Josh Engroff , Op-Ed Contributor, June 17, 2016

When it comes to word pairings, “oligopoly” and “delightful” are not a natural combination. The synonyms of “delightful” include “marvelous,” “wonderful” and “splendid.” An oligopoly refers to a state of limited competition in which a few firms control the market -- hardly a marvelous state of affairs. Recent (and decidedly undelightful) oligopolies include credit ratings agencies, health insurance firms, and oil companies.

After reading the combined 313 slides of Mary Meeker’s "Internet Trends 2016" and Luma Partners’ "State of Digital Media 2016," one would be hard-pressed not to describe the Google-Facebook lock-up as a duopoly. Putting some numbers to this assertion:

-- 76% of all Internet advertising growth over the past year has gone to Google and Facebook.

-- While the value of most publicly traded ad-tech and marketing-tech companies declined considerably in the past year, Google and Facebook together added $250 billion to their market cap.

-- This single-year increase in the combined value of Facebook and Google is greater than the entire market cap of P&G and WPP put together.

Add Amazon and Apple to that mix, and you have an oligopoly.

But so what? Is this state of affairs bad for consumers? Not obviously. Though fierce competitors, these four companies share the same DNA: They are all extremely good at creating (and acquiring) delightful products and services, often at low or no direct cost to consumers. YouTube, Instagram, FB Messenger, Amazon Prime, the iPhone -- the list is of great products is long and growing.

What’s more, these companies often reinvest their profits into things that further improve the consumer experience. This is one way to understand their intense focus on, and investment in, artificial intelligence and machine learning. The point of AI in a consumer-centric context is to deliver frictionless, highly personalized experiences that correctly anticipate a user’s future needs.  

As a case in point, Google’s vision for Google Home, revealed during its recent I/O event, was unusually compelling because it landed precisely at the intersection of sci-fi dreamscape and near-term reality.

If Nest, Google Now and the Amazon Echo got together and had a love child, it would look like Google Home. Google Now has become Assistant, and Google Assistant is at the heart of Home, which seems well-poised to deliver on its promise of “an ambient experience that extends across devices” to cars, wearables and living rooms.

Watching the video, I wondered how Sonos, Amazon Echo and products made by smaller companies would avoid getting steamrolled by Home.

And there’s the rub. All this consumer delight translates into consumer attention that is spent across a wide range of products, each leading their respective fields, whether consumer electronics, software, ecommerce, advertising, content distribution,  video, or mobile messaging. And this wide range of products is controlled by a very small group of players.

This dynamic is fundamentally changing the business landscape for a whole group of companies, from direct competitors losing market share as their business models get torpedoed, to noncompetitive companies firmly situated in the media and advertising ecosystem. This latter group includes marketers, media companies, and agencies.

Even if you focus very specifically on digital content and advertising, a number of tough questions present themselves:

Content Distribution: the experience of publishers like Buzzfeed illustrates the dominance of a new model of content consumption in which only a fraction of content gets consumed directly on the site itself.  If consumers engagement with your content overwhelmingly occurs on large platforms like Facebook, YouTube, and Snapchat, what’s the point of having your own Web site and mobile app?

Third-Party Targeting and Measurement: Part of the point of both Google AMP and Facebook Instant Articles is to improve the user’s content experience of content by stripping out third-party Javascript and other code that negatively impacts  rendering time. As the old workhorses of ad-tech measurement thus get forced out of the picture, will third-party pixels go the way of third-party cookies? What will that mean for independent third-party attribution and verification partners, and for third-party independent ad servers?

Creative Innovation: If the future of digital advertising is native experiences -- at this point, it’s pretty clear that it is -- and those experiences are consolidated within a small group of platforms and publishers, does creative innovation shift away from rich media companies and agencies and to the platforms themselves? Will everything just end up being video?

Transparency for Marketers: If the majority of digital ad spend ends up flowing through the large platforms that have aggregated not only audience reach but also all measurement, analytics and ad spend reporting, what does that mean for marketers that have come to expect transparent, independently verified views of advertising economics and performance?

Confounding questions, indeed.