RTBlog was originally conceived to discuss the passage of time, specifically how advertising, media and marketing is affected by technology, data and platforms enabling it to occur in “real-time.” So it’s fitting, coming into a new year, to mark some passage of time -- past, present and future.
Our marketplace’s most recent past has been dominated by two players -- Google and Facebook -- and according to the present outlook, they will only become even more dominant in the not-too-distant future.
“The two companies had 75% of the world’s digital advertising market share outside of China, rising to 80% in 2018,” estimates Pivotal Research Group analyst Brian Wieser in a note sent to investors early this morning in anticipation of fourth quarter earnings releases by the major digital advertising market players.
He estimates the companies’ revenues expanded 19% and 32%, respectively in 2017.
Looking into the longer term future, Wieser projects that by 2022, the digital ad marketplace will truly become the “Big 2.” By that year, he estimates they will control a 91% share of total digital ad spending, “leaving approximately $30 billion for all other digital media owners.”
That concentration of market power is unprecedented in Madison Avenue’s history. While two networks -- CBS and NBC -- dominated TV’s early history, their market share rapidly eroded as new rivals, first ABC, then Fox and the burgeoning cable and national syndication supply chain, began fragmenting TV’s audience pie. And shares of ad spend followed.
Inexplicably, the opposite seems to be happening in the digital audience/advertising marketplace. Despite even more rampant hyper-fragmentation of digital audience impressions -- everything from scalable emerging players like Twitter, Snap, etc., to the long-tail (programmatic, etc.) -- digital ad spend consolidates even further.
In fact, Wieser’s analysis shows that one of the Big 2’s -- Facebook’s -- audience reach is actually flat or down.
“From our analysis of Nielsen’s DCR data for September (the most recent month for which this data is available) core Facebook consumption failed to grow year-over-year for a second consecutive month,” Wieser cautions, adding, “people 18+ were down -0.1% year-over-year following a decline of -0.9% in August, the first month for which year-over-year data was available.”
How are the Big 2 defying the laws of supply and demand, if not the physics of gravity? I think the answer is the same thing that has propped up the big TV networks: ease of use for advertisers and media buyers faced with an increasingly fragmented and complicated marketplace of audience reach and attention.
The trade-off, needless to say: The ad industry will become even more beholden to two suppliers over time.