For well over a year now, the digital advertising and publishing industries have grappled with the growing power of Google and Facebook, which suck up 98% of every new ad dollar spent online, according to some estimates. With so much growth and power concentrated in just two companies, publishers worry about the viability of their ad businesses, while advertisers bemoan their loss of leverage around ad buys.
Deeply unsettled by the idea of a Google-Facebook duopoly, both groups have done what they can to defend against it. But so far, nothing they’ve done seems to have worked. Google and Facebook both turned in mammoth financials in the first half of 2017, and are on track to account for 64.6% of digital ad dollars spent in the US this year, according to eMarketer.
"There have been hopes for various initiatives, but they just haven’t panned out,” David Chavern, head of the News Media Alliance — until recently the Newspaper Association of America — told BuzzFeed News in an interview.
Chavern, like his counterparts, realizes he’s losing ground fast — rapidly enough that he’s taking measures he said were unnecessary even a few short months ago. In February, Chavern told BuzzFeed News he saw little reason to seek government help in leveling the advertising playing field for the nearly 2,000 companies he represents. "I don’t know what kind of legal or legislative action could be taken," he said. "We’re not waiting for the government to change the terms of engagement.”
Six months later, Chavern asked for the assistance. In a July 9 opinion piece in the Wall Street Journal, he asked Congress to free newspapers from anti-trust laws prohibiting them from negotiating as a unit with the two giants. “The only way publishers can address this inexorable threat is by banding together,” he said.
Independent publishers aren't the only ones unsettled by Google and Facebook’s remaking of the digital advertising landscape. TV networks, advertisers, and the ad agencies that represent them are also looking for leverage against the duopoly, but they’ve been having trouble finding any. Earlier this year, they made something of a stink over brand safety, castigating Google for showing ads for their products and services alongside videos promoting hate, racism, and violence. Blue-chip advertisers including Johnson & Johnson, Verizon, and Walmart said they would pull their advertising from YouTube as a result.
For a moment, the outcry seemed to put Google and Facebook on their heels. But what seemed like a punch landed was not. Many of the advertisers who said they would boycott YouTube kept running ads on the platform — Johnson & Johnson, Verizon, and Walmart among them. Others that did boycott returned quickly, and the number of advertisers on YouTube’s preferred channels jumped 50% in May, according to MediaRadar. YouTube’s ad revenue is expected to grow by 26% this year, according to eMarketer. Facebook’s is expected to grow 35%.
“People took it as a good chance to grind their ax with both Google and Facebook,” Mike Racic, head of media at the digital marketing agency iCrossing, told BuzzFeed News. “The industry in general, the TV networks, and other digital players, everyone took this moment to complain."
The brand safety episode illustrates just how hard it is to stop the Google and Facebook freight train. Google and Facebook attained duopoly power specifically because of a super-compelling value proposition: Both platforms stand out by providing advertisers access to enormous amounts of people, and enabling them to slice and dice audiences with unparalleled precision and accuracy. Spending money with them can be formulaic for advertisers: X dollars in gets Y dollars out. Nothing else online even comes close. “There was a lot of saber rattling, a lot of alternatives, alternatives, alternatives,” Racic said. “In the digital realm, there is no other alternative.”
For a moment this winter, some in the digital ad industry hoped Snap Inc. would emerge as a legitimate alternative to Facebook and Google, one that would temper The Duopoly’s power. The young, dynamic company that famously spurned a $3 billion acquisition offer from Facebook was hurtling toward a highly anticipated IPO with a ton of momentum. Even though Snapchat’s audience was a fraction of the size of Facebook’s, and its revenue well under $1 billion, the industry was optimistic. “For advertisers, Snapchat provides an alternative to the Facebook-Google duopoly,” The Economist declared in the run-up.
Snap’s stock skyrocketed the day it hit the public markets, and investors celebrated — but only briefly. Snap’s first earnings report came in well below Wall Street expectations, and its stock cratered. The company’s shares now trade $4 below their IPO price.
Snap’s poor performance can be traced back in part to Facebook’s decision to ruthlessly copy nearly every part of its product. But the story doesn’t end there. Advertisers, some of whom have publicly criticized Facebook and Google on a range of issues from brand safety to misleading metrics, don't seem to be allocating money to competitors like Snap in a way that would facilitate the competition they claim to desire.
“Pretty much everyone will say it is much healthier to have multiple players competing with each other,” Randall Rothenberg, CEO and president of the Interactive Advertising Bureau, an industry trade group, told BuzzFeed News. “After they’ve said that, they all go and they pay into a handful of dominant players.”
With Snap struggling, advertisers are starting to name new companies for the role it was supposed to fill. “Amazon is going to be an increasingly important force and one we have to better understand,” Martin Sorrell, CEO of ad agency holding company WPP, said last month. And some are even pointing to the Verizon-owned AOL and Yahoo as possible challengers.
But if anything, dollars are moving away from challengers into the big platforms’ pockets. “We’ve moved millions of dollars going into Snapchat into Instagram Stories ads because they’re less expensive and have a much higher view-through rate,” one ad agency executive told BuzzFeed News.
As Facebook and Google continue to accrue power, everyone else is struggling to keep up. In the spring of 2017, ESPN, Yahoo, HuffPost, Vocativ, MTV News, and a number of other high-profile media companies had substantial layoffs. “What’s behind the recent media bloodbath?” asked journalism news site Poynter. It answered: “The dominance of Google and Facebook.”
This may just be the beginning, some argue. Tony Haile, founder of the digital publishing tool Chartbeat and CEO of Scroll, a publisher technology company, told BuzzFeed News that the growing dominance of Facebook and Google may cause agencies to stop buying ads elsewhere. If the two giants’ growth continues, he said, employing media buyers and media planners to buy ads outside of Facebook and Google might not make sense at a certain point.
If that point is reached, it could have a devastating effect on the digital publishing industry. “If I was a publisher running a monocultural ad business in 2020, I'd invest in non-dry-clean pants,” Haile said.
But not assuredly so. “We buy local TV and FM radio and it's practically sub-economic to do so,” Rob Norman, chief digital officer at the ad agency GroupM Worldwide, told BuzzFeed News, drawing a parallel.
And Facebook and Google do have some incentive to keep media companies in business, since that’s where the content they depend on comes from. “If there’s no interesting news and entertainment for consumers to seek out or share, [Facebook and Google] start to see that affect their businesses,” Jason Kint, CEO of trade association Digital Content Next, told BuzzFeed News.
But even outside of a worst-case scenario, the Facebook-Google duopoly stands to gain more control of the ad market overall in the coming years — particularly with people watching video online instead of on TV. The two companies have long been laying the groundwork for a big spike in online video consumption, and they’re well-prepared to take advantage of it now that it’s here.
As Facebook and Google prepare for the future, the rest of the digital advertising and publishing world is still grappling with the present, from advertisers nervous they’ll lose leverage in a consolidating market to News Media Alliance members concerned about their very existence. For more than a year, these groups have tried everything to slow the two giants’ onslaught, but they’ve lost ground, not gained. After months of protest and negotiation, this much is evident: Nothing they’ve done is working, and it’s not clear what will.
Google and Facebook are on track to account for 64.6% of digital ad dollars spent in the US this year. An earlier version of this story didn't specify the category of advertiser spending.