Google and Facebook Now Take Less Than Half of Internet Advertising Dollars

Money flowing from one hand to another

Photo: MIA study (Shutterstock)

Science fiction author Stephen R. Donaldson said that “Everything dies, from the smallest blade of grass to the largest galaxy.” A few years ago, he might have told you that’s true, about everything except Google’s and Meta’s ad businesses. My goodness, how times change.

Google and Meta control less than 50% of digital ad spending for the first time since 2014, a trend that is poised to accelerate in the coming years, according to Axios. Citing predictions from Insider Intelligence, Axios reports that Google and Meta are expected to generate 48.4% of online ad revenue this year (28.8% for Google, 19.6% for Facebook parent company), a a figure that has steadily decreased since the peak of the technological giants in 2017, when they monopolized 54.7% (Google with 34.7%, Meta with 20.0%).

“Google and Meta face a number of challenges for their ad businesses, including a more privacy-focused market, economic turbulence, a reset in expectations following the pandemic-induced spending boom, and general uncertainty in the technology and media sectors.” Paul said. Verna, Principal Analyst at Insider Intelligence.

For a long time, fans of market competition worried (rightly so) about Google and Meta’s duopoly over digital advertising, the business that powers the entire Internet. The two advertising giants aren’t going away anytime soon, but make no mistake, we are entering a new era in the online world.

“These are more sober days for these companies, but on top of losing some share to Amazon and TikTok, although we don’t currently see an existential threat to either,” Verna said.

Meta did not respond to a request for comment. Google declined to comment on its finances.

There are many reasons for the change, but my two favorites start with the letter “A”. You may have heard of them: Amazon and Apple. When you hear those names, “ads” is probably not the first word that comes to mind, unless you work in marketing.

Amazon and Apple are probably the biggest disruptors of the corporate advertising industry in the last ten years. Thanks to their efforts, digital advertising is undergoing a sea change.

The Apple effect is most interesting. Last year, your iPhone started asking you if you wanted your apps to track you. It probably didn’t sound like much to most people, but it made a young businessman named Mark Zuckerberg very, very upset. That setting, called App Tracking Transparency, cut off the flow of data from iPhone users to Facebook and Instagram. That’s what you might call a “what a thing.” Tracking you through other companies’ apps and websites is a critical part of Meta’s ad infrastructure. Ultimately, Meta said it lost $10 billion dollars due to that scenario alone.

One of the great things that App Tracking Transparency did was open the doors to the competition. Meta’s advertising business was destabilized, and third-party data was suddenly much harder to obtain. That made large consumer-facing companies with tons of data about their own customers start thinking about launching their own ad businesses. A lot of of them did, especially retailers, like 7-11, Best Buy, Chewy, CVS, DollarTree, Doordash, eBay, Home Depot, Instacart, Kroger, Lowe’s, Macy’s, Target, Walgreens, Walmart, Wayfair, Ulta, not to mention other tech competitors like TikTok. Even Marriott got in on the game.

To quote advertising industry analyst Eric Seufert, these days, “everything is an ad network.”

But one company was already hard at work on the ad project even before Apple changed its privacy settings. Amazon’s advertising business is exploding. Today, Amazon ranks in over $30 billion a year from ads, which is actually more money that Amazon does on Prime and all of its other subscription services combined.

“All of these trends amount to seismic shifts for Google and Meta, two companies that, until recently, could be counted on to exceed Wall Street’s lofty expectations and, in some cases, their own guidance,” Verna said.

Get used to it. Insider predicts that Amazon will capture 12.7% of US dollars in digital advertising by 2024, compared to 17.9% projected for Meta.

Seufert blogs mobile development memoryor that Google and Meta are likely to retain the top two spots on the list of digital ad revenue generators for the foreseeable future. But the duopoly era of its undisputed online dominance has come to an end:

Given the staggering growth of Amazon, TikTok, and various retail media networks, including ones launched this year such as Netflix, it’s reasonable to characterize the digital advertising market in 2022 as materially more competitive than it was in 2016 or 2017. Duopoly’s description it’s tenuous with Google and Meta seeing a combined minority stake.

48.4% of the nearly $250 billion digital advertising business isn’t exactly pocket change. But in 2023 and beyond, the internet and technology landscape will look very different in the flow of advertising dollars to other companies.

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