Facebook and Google are undeniably the masters of digital advertising -- overwhelmingly demanding the lion’s share of revenues in the West, and stomping over the competition with little fear of being toppled.
Although they are by all accounts the two largest advertising businesses on the market, the term "duopoly" describes an outdated overview of advertising and ad-tech that is not reflective of the industry as it is now -- a complex ecosystem of competing forces that are growing and shaping the world of digital marketing.
The reality facing the so-called duopoly is that it faces three incredible challenges that are not disappearing, setting the industry up for significant change over the coming years.
Competition is creeping up
According to recent research by eMarketer, competition from Amazon is causing Facebook and Google’s stronghold on the ad market to shrink.
Amazon’s unrelenting growth and aggressive strategy is allowing it to disrupt many different industries, with digital advertising becoming one such focus. Amazon has been making moves in self-serve programmatic advertising and building its ad platform to make buying ads as easy as buying an item on the e-commerce site.
This is an unprecedented invasion on the duopoly’s space, and Amazon has now become the third-largest player in digital advertising in the US from number five, overtaking Oath and Microsoft.
Research shows the duopoly is set to shrink down to 55.8% by 2020, compared to 56.8% this year, alongside shrinking shares of ad spend. This year, Facebook and Google are expected to receive 48% of new expenditures, whereas in 2016 the platforms commanded 73% of new digital ad spend. Meanwhile, Amazon’s ad business is set to surpass its cloud computing business by 2021.
There is also mounting competition from the likes of Snapchat, which according to the same eMarketer report is experiencing faster-than-expected growth (with revenues jumping almost 82%), as well as AT&T and other telecoms businesses that are making plays in the digital advertising space.
A slap on the wrist from the regulators
In Europe the growing appetite for regulation and the changing attitudes toward digital advertising has resulted in the introduction of stringent regulation with GDPR, limiting the powers of digital advertisers significantly. What’s more, calls for wider regulation of the tech giants are getting louder.
The call for regulation is expanding beyond the EU too, with other areas including the US, India, and Brazil announcing similar legislation to GDPR to protect consumers. California, the home of Silicon Valley, recently passed a new privacy law, and China continues to strike the balance between using tech to grow the economy while trying to crack down on what it sees as a threat to its power.
We expect to see this trend continuing, with more regulatory guidelines adopted across the world in the coming months, to move digital businesses onto a level playing field.
Overall, the more regulation there is within digital advertising, the more trouble lies ahead for Facebook and Google’s stronghold -- especially if threats to introduce a regulatory watchdog to scrutinise the tech titans is enforced.
The global media landscape
The consumer of today is very different from the consumer of five years ago. Increased use of smartphones across the world is fundamentally changing the way we consume media, disrupting the boundaries between local, national and international, and paving the way for the global consumer.
For this reason, it’s important to consider the duopoly in the context of globalisation. Facebook and Google are titans, but they have both faced significant barriers in China thanks to their strict regulations.
Similarly, in India -- which is the world’s largest market by population -- the mobile advertising industry is growing. But there is no evidence yet to show that the so-called duopoly will dominate in this market in the same way that it has in the U.S. or U.K. Simply put, from a global perspective the duopoly isn’t as mammoth as it seems in the West.
Clearly, the internet advertising giants are still the goliaths. But the wider ecosystem is growing impressively, and as legislation increasingly cracks down on their powers, I believe we’ll begin to see a significant change in the way the digital advertising space is viewed.