Deconstructing The Google/Facebook Duopoly

We’ve all heard about the Google/Facebook duopoly. This was what I was going to write about last week before I got sidetracked. I’m back on track now (or, at least, somewhat back on track). So let’s start by understanding what a duopoly is.

One definition: a situation in which two suppliers dominate the market for a commodity or service.

And this, from Wikipedia: In practice, the term is also used where two firms have dominant control over a market.

So, to have a duopoly, you need two things: domination and control. First, let’s deal with the domination question. In 2017, Google and Facebook together took a very healthy 59% slice of all digital ad revenues in the US. Google captured 38.6% of that, with Facebook capturing 20%. That certainly seems dominant.

But if online marketing is the market, that is a very large basket with a lot of different items thrown in. So, let’s do a broad categorization to help deconstruct this a bit.  Typically, when I try to understand marketing, I like to start with humans -- or, more specifically, what that lump of grey matter we call a brain is doing.



And if we’re talking about marketing, we’re talking about attention -- how our brains are engaging with our environment. That is an interesting way to divide up the market we’re talking about, because it neatly bisects the attentional market, with Google on one side and Facebook on the other.

Google dominates the top-down, intent-driven, attentionally focused market. If you’re part of this market, you have something in mind and you’re trying to find it. If we use search as a proxy for this attentional state (which is the best proxy I can think of) we see just how dominant Google is. It owns this market to a huge degree.

According to Statista, Google had about 87% of the total worldwide search market in April.

The key metric here is success. Google needs to be the best way to fulfill those searches. And if market share is any indication, it is.

Facebook apparently dominates the bottom-up awareness market. These are the people killing time online, not actively looking with commercial intent. This is more of an awareness play, where attention has to be diverted to an advertising message. Therefore, time spent becomes the key factor. You need to be in front of the right eyeballs, and so you need a lot of eyeballs and a way to target to the right ones.

Here's where things get interesting. If we look at share of consumer time, Google dominates here. But there is a huge caveat, which I’ll get to in a second.

According to a report this spring by Pivotal Research, Google owns just under 28% of all the time we spend consuming digital content. Facebook has just over a 16% share of this market.

So why do we have a duopoly and not a monopoly? It’s because of that caveat: a whopping slice of Google’s “time spent” dominance comes from YouTube. And YouTube has an entirely different attentional profile, one that’s much harder to present advertising against.

When you’re watching a video on YouTube, your attention is “locked” on the video. Disrupting that attention erodes the user experience. So Google has had a tough time monetizing YouTube.

According to Seeking Alpha, Google’s search ad business will account for 68% of its total revenue of $77 billion this year. That’s over 52 billion dollars that is in that “top-down” attentionally focused bucket.

YouTube, which is very much in the “bottom-up” disruptive bucket, accounts for $12 billion in advertising revenues. Certainly nothing to sneeze at, but not on the same scale as Google’s search business.

Facebook’s revenue, at about $36 billion, is also generated by this same “bottom-up” market, but they have a different attentional profile. The Facebook user is not as “locked in” as they are on YouTube. With the right targeting tools, something that Facebook has excelled at, you have a decent chance of gaining their attention long enough to notice your ad.


If we look at the second part of the definition of a duopoly -- that of control -- we see some potential chinks in the armor of both Google and Facebook. Typically, market control was in the form of physical constraints against the competition. But in this new type of market, the control can only be in the minds of the users. The barriers to competitive entry are all defined in mental terms.

In  Google’s case, they have a single line of defense: they have to be an unbreakable habit. Habits are mental scripts that depend on two things: obvious environmental cues that trigger habitual behavior, and acceptable outcomes once the script completes. So, to maintain that habit, Google has to ensure that whatever environment you might be in when searching online for something, Google is just a click or two away. Additionally, the company has to meet a certain threshold of success. Habits are tough to break, but there are two areas of vulnerability in Google’s dominance.

Facebook is a little different. It needs to be addictive. This is a habit taken to the extreme. Addictions depend on pushing certain reward buttons in the brain that lead to an unhealthy behavioral script which becomes obsessive. The more addicted you are to Facebook and its properties, the more successful it will be in its dominance of the market.

You can see the inherent contradiction here. Despite Facebook’s protests to the contrary, with its current revenue model, it can only succeed at the expense of our mental health.

I find these things troubling. When you have two for-profit organizations fighting to dominate a market that is defined in our own minds, you have the potential for a lot of unhealthy corporate decisions.  

2 comments about "Deconstructing The Google/Facebook Duopoly".
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  1. Ari Rosenberg from Performance Pricing Holdings, LLC, August 21, 2018 at 4:18 p.m.

    Gord so glad I caught this column -- what a great and unique way to breakdown the Duoploly.  Their are more layers to this onion of course but it starts as you point out with how we as humans interact with these web sites (which is what they are).  I broke my FB addiction five years ago and never looked back and I think there are many who will do that or are doing that now -- FB made me depressed.  Google is a different story -- they are "used" by people in everyday life and that habit will be much tougher to break because there are no real alternatives unless we start using physical maps again :) -- one thing I believe that gets overlooked when it comes to Google is how ruthless they are/have been as a business -- they take content they don't produce and then sell ads against those adjacencies.  The publisher who produces "the corn" loses to the guy giving directions on where to find the best corn.  It's an amazing legal injustice to publishers.   Google didn't figure out this business model they just schooled those who got there first (Alta Vista, Goto, Ask Jeeves) with a better way to crawl and report results and then stole Overture's business model (and paid a settlement for that theft of intellectial property).  To become a duopoly you have to stop caring about the well being of human beings, and then pretend you do.   

  2. Dale Knoop from TRE, August 21, 2018 at 5:13 p.m.

    I love this article and Ari's comment. Love. The duoploy's business model is akin to being paid to drop shoppers off at the mall, point at it and say 'it's in there somewhere." Meanwhile Google accepts payment from those that want to be placed at the door of the mall no matter their true contextual and intentional relevance. That their "scheme" can be gamed plays to the hamster wheel of SEO.

    The internet can be changed from 1 mile wide and 10 miles deep to 10 miles wide an 1 inch deep with voice. An I'm not talking "Hey Alexa" voice. Voice at scale delivering the dopamine rush of instant gratification is so very, very close. I have seen it in my mind.

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