Oded Napchi, CMO, HIRO Media offers up his explanation as to why Google and Facebook may not be considered a “Duopoly” when looking at two main advertising segments: desktop, video and mobile display
When Verizon bought Yahoo and then created the subsidiary Oath, advertisers voiced their pleasure as the move challenged the duopoly of Google and Facebook, which are reportedly selling more than half of the U.S.’s digital ads.
This discussion raised for me the question – are Facebook and Google a duopoly or is it just a perception? In this article, I will try to present an alternative view in which, we are not in a duopoly but in a tribal eco system where we have several competing segments. Weather tribes are reality and duopoly is a perception, or vice versa, I will let you decide.
We are in the, what I would call the “Era of Confusion” between perception and data, i.e. what and how we think about a certain something (be it a presidential candidate or a product) and what actually is that something. To follow this train of thought, we perceive spinach has iron in it, due to Popeye, but the reality is that spinach simply doesn’t have all that much iron.
In this article, I will attempt to present an alternative view by focusing on two main advertising segments: desktop video and mobile display.
Desktop Video and Duopoly
The first and almost trivial fact to check is ad money – how much money Facebook and Google take from the general advertising pie.
Taking into consideration all digital advertising data, Google indeed holds about 40% of the American digital advertising (numbers here are mobile + desktop) but only 18% of display. Facebook holds less than 20% and 40% if you’re only examining the display market.
Already, from a money perspective, it is not a duopoly. Pepsi and Coke, as an example of a duopoly, hold about 70% of the market. Android and iOS are also over 70%. The digital duo is actually a bit more than a half of the digital world.
The main problem in money analysis is that ad money could be counted in several methods, which most of them will be less relevant to the CMO. The important criteria for a CMO is the dominance of media (i.e. where my ads are running) and dominance of the agency (i.e. who creates and decides where to put my ads). The storage server of the file, as an example, is considered as ad money but is not relevant to the CMO.
With a big part of Google revenues coming from creative storage and other technology related expenses through DoubleClick, it is therefore advised to look at the amount of ad views.
Google is perceived as a true market leader in video, thanks to YouTube, but looking at the comScore ranking results of H1 2016 for video ad views (Google was removed from the list during H2 2016), will show that Google is about 10% of the ad view volume and Facebook even lower.
So, who are the leaders? The independent web, Yahoo, Aol, RTL Group, and others.
In simple words, in desktop video, Google might indeed is eating 40% of your ad money but is actually about only 10% of the media.
To sum this part, in desktop, traditional independent publishers present far more ads than the duopoly of Google and Facebook.
Mobile Display and Duopoly
In mobile, there is an auditing challenge as Facebook isn’t being audited by a third-party. We will need to make some easy assessment – mainly the service that holds most of the usage is the service that has the most advertising potential.
Facebook is indeed the single most popular app in mobile but only presents 17% of the usage. Gaming and entertainment outside Facebook and YouTube are 33%, double the size of Facebook. What is the fastest growing category? Music. Again, a segment that Facebook is hardly active in.
Another interesting fact is that the messaging world is much more fragmented than you would think. Facebook (including WhatsApp) are indeed 60% of the US market but it is almost equal to numbers 2 and 3 (Skype, Twitter) as most people use more than one messaging app.
So even in social and messaging, Facebook and Google are not duopoly
To sum this up, we can say that in mobile there is no duopoly – Facebook is more or less the same size of its competitor in messaging and the social segment of Facebook and Google are smaller than the gaming segment.
So why do we think we have a duopoly?
The reason for that brings us closer to understanding why it is only a perceived duopoly – Google is extremely involved in the tech ecosystem – your file is hosted at Google DFA (~10% cut), the ad will be served by Google DFP (another ~10%) the site might be using Google SSP (35%) and advertiser a Google DSP (~20%).
Most of these components are pure technology and not relevant to your advertising decision. It will be like saying Microsoft has a share in the advertising industry as all video ads use a premier video editing software.
And Facebook? They are still relatively small with 20% of the market. The reason for their perception is more psychological than actual.
The numbers show that Google and Facebook are not dominating the advertising market relevant to most marketers.
The market structure is “tribal” and you have several tribes – messaging, social, gaming, search, and independent web – some of these tribes have dominators (Facebook in social and Google in search) while others don’t.
Facebook and Google have a monopoly on their tribes but not over the entire ecosystem.
This leads us to our initial question – Are we in a tribal eco system or a duopoly? If I couldn’t convince you I hope at least I gave a new angle to view the market. We should remember that invention of duopoly has advantages –
If a marketer thinks he has only 2 options, each of the options will get a higher share of the market.
A tribal approach, means that as a marketer you have many good alternatives to Facebook and Google, most of them are the same size or even bigger than Facebook and Google. You just have to challenge what is perceived to be the status quo.
Originally published in MARTECH ADVISOR